Old Age Security is a cornerstone of retirement income for millions of Canadians, but it is not a flat benefit that everyone keeps in full. Once your income crosses a certain level, the government starts taking some of it back through what is known as the OAS clawback, officially called the recovery tax.
For 2026, new income thresholds are in effect, and they matter more than many retirees realize. Crossing the line by even a small amount can reduce your monthly payments, while poor planning can cost thousands of dollars over time. Understanding how the clawback works and where the new limits sit gives you a chance to plan ahead instead of reacting after the fact.
What the OAS Clawback Really Is
The OAS clawback is not a separate tax bill you pay out of pocket. It is a reduction in the OAS payments you receive.
How the Recovery Tax Works
When your net income reported on your tax return rises above the government’s set threshold, a portion of your OAS is gradually recovered. The higher your income climbs above that level, the more OAS you lose.
Once income reaches the maximum threshold, OAS is fully clawed back and you receive none of it for that recovery tax period.
Why the Government Uses a Clawback
The purpose of the clawback is to focus OAS benefits on seniors who rely on them most. Higher-income retirees are expected to fund more of their retirement through private savings, pensions, or investments.
Why the Clawback Threshold Changes Every Year
The income limits are not fixed. They move annually to reflect economic conditions.
Inflation and Cost-of-Living Adjustments
Thresholds are indexed to inflation, which helps prevent seniors from being pushed into clawback territory simply because prices and wages rise over time. As the cost of living increases, the government adjusts the income limits upward.
Policy Adjustments and Program Updates
Beyond inflation, thresholds can also shift due to policy decisions. Changes to benefit amounts, age-based enhancements, or broader retirement policy updates can all influence where the clawback line is drawn.
The OAS Clawback Thresholds for 2026
For the July 2026 to June 2027 recovery tax period, which is based on your 2025 income, the government has set new minimum and maximum income limits.
Minimum Income Threshold
The clawback begins once net income exceeds $93,454. Below this level, OAS payments are not reduced.
Maximum Income Thresholds by Age
For seniors aged 65 to 74, OAS is fully clawed back once income reaches $152,062.
For seniors aged 75 and over, the maximum threshold is higher at $157,923.
This means older seniors can earn more income before losing their entire OAS benefit.
Why Age Matters in the Clawback Calculation
The government introduced age-based differences to reflect changing needs later in retirement.
Higher Thresholds for Seniors 75 and Older
Older seniors often face higher healthcare and living costs, along with longer retirement horizons. By setting a higher maximum threshold for those 75 and over, the system allows them to keep OAS at higher income levels than younger retirees.
What This Means for Planning
If you are approaching age 75, your clawback exposure may change. Income that would fully eliminate OAS at age 70 may not have the same effect once you are older, which can influence withdrawal and income timing strategies.
What Income Counts Toward the OAS Clawback
Not all income is treated the same, and understanding what is included can make a major difference.
Income That Counts
The clawback is based on net income reported on your tax return. This typically includes employment income, pensions, RRSP and RRIF withdrawals, rental income, and taxable investment income.
Income That Does Not Count
Withdrawals from a TFSA do not count toward net income and do not affect OAS. This makes TFSAs a powerful planning tool for retirees trying to stay below clawback thresholds.
The calculations and recovery are administered by the Canada Revenue Agency using the income reported on your annual tax return.
Smart Ways Retirees Manage the OAS Clawback
The clawback is not always avoidable, but it is often manageable with planning.
Spreading Income Over Time
Instead of taking large RRSP or RRIF withdrawals in a single year, spreading withdrawals over several years can help keep income below the threshold.
Using TFSAs Strategically
Because TFSA withdrawals are not taxable, they can provide spending money without increasing net income. Many retirees shift savings toward TFSAs before retirement for this reason.
Delaying OAS Payments
Delaying OAS past age 65 increases the monthly benefit and can make sense for retirees who expect higher income early in retirement but lower income later.
Coordinating With a Spouse
Income splitting with a spouse, where allowed, can reduce the higher earner’s net income and help preserve OAS benefits.
Annual Updates Mean Ongoing Attention Is Required
The clawback thresholds change every year, which means retirement planning cannot be set once and forgotten.
Why Staying Current Matters
A strategy that worked last year may not work this year if thresholds move or income changes. Annual reviews help retirees adjust withdrawals, investments, and benefit timing.
Planning for the Long Term
Retirement can span decades. Monitoring income and clawback exposure year by year helps ensure OAS remains a stable part of your income rather than a disappearing benefit.
OAS Clawback Rules for Non-Residents
Canadians living outside the country face additional considerations.
World Income Still Counts
Non-residents may still be subject to OAS clawback if their net world income exceeds the threshold.
Withholding Taxes Can Apply
Non-residents are typically subject to a higher withholding tax on Canadian pensions, unless a tax treaty reduces that rate. This is separate from the standard recovery tax applied to residents.
Why Knowing the 2026 Threshold Can Save You Thousands
The OAS clawback is one of the most misunderstood parts of Canada’s retirement system. Many seniors only discover it after their payments drop or disappear entirely.
By understanding the 2026 thresholds, knowing what income counts, and planning withdrawals carefully, retirees can often preserve more of their benefits and improve cash flow throughout retirement.
The Bottom Line on the OAS Clawback in 2026
The new OAS clawback thresholds for 2026 set clear income lines that determine how much of your benefit you keep. For many retirees, staying just below those limits can mean thousands of dollars more in OAS over time.
Retirement income planning is not only about how much you earn, but how that income is structured. Staying informed about annual threshold changes and adjusting your strategy accordingly is one of the simplest ways to protect your retirement income and avoid costly surprises.