As Canadians navigate the 2026 tax year, understanding the nuances of the Old Age Security (OAS) recovery tax—commonly known as the “clawback”—is essential for maintaining retirement income.
The federal government adjusts these thresholds annually to account for inflation, meaning the amount you can earn before your benefits are reduced has shifted once again.
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Staying informed about these limits helps seniors avoid unexpected tax bills and ensures they maximize their Old Age Security payments.
Understanding the 2026 OAS Thresholds
The OAS clawback is a 15% recovery tax applied to every dollar of net world income that exceeds a specific limit set by the Canada Revenue Agency (CRA). In 2026, several different thresholds are in play depending on whether you are looking at your current monthly checks or planning for your next tax return.
Minimum Income Recovery Thresholds
For the 2026 tax year, the minimum income recovery threshold is $95,323. If your net world income for 2026 exceeds this amount, you will be required to repay a portion of your OAS benefits during the recovery tax period of July 2027 to June 2028.
However, the payments you receive throughout 2026 are determined by your income from previous years:
- January to June 2026: Payments are based on your 2024 income (threshold: $90,997).
- July to December 2026: Payments are based on your 2025 income (threshold: $93,454).
Maximum Income Limits for Pension Eligibility
Once your income reaches the “maximum recovery threshold,” your OAS pension is reduced to zero. For the 2026 income year, these estimated maximum limits are:
- Ages 65 to 74: Approximately $154,708
- Ages 75 and over: Approximately $160,647
Seniors aged 75 and older have a higher ceiling because their base pension amount was increased by 10% starting in 2022, requiring a higher income level to fully “claw back” the larger benefit.
Who is Most at Risk of the OAS Recovery Tax?
The clawback does not only affect the very wealthy; it often impacts middle-income seniors who experience a “one-time” spike in taxable earnings. You may be at risk of the recovery tax in 2026 if you fall into the following categories:
- Individuals with Large RRIF Withdrawals: Mandatory Registered Retirement Income Fund (RRIF) withdrawals can push your income over the $95,323 mark, especially if you have significant savings.
- Sellers of Capital Assets: Selling a secondary property or a taxable investment portfolio can trigger a large capital gain, which counts toward your net world income.
- Recipients of Significant Corporate Dividends: The CRA “grosses up” dividend income for tax purposes, meaning the amount used for the OAS calculation is higher than the actual cash you received.
- Working Seniors: Those who continue to work part-time or full-time while collecting OAS may find their combined employment and pension income exceeds the limits.
Strategic Planning to Reduce the 2026 Clawback
Proactive financial management can help you keep your income below the thresholds and preserve your OAS pension benefits.
- Prioritize TFSA Withdrawals: Unlike RRIF or RRSP withdrawals, money taken from a Tax-Free Savings Account (TFSA) is not considered taxable income and does not count toward the OAS clawback.
- Utilize Pension Splitting: If you have a spouse in a lower tax bracket, you can split up to 50% of your eligible pension income with them, potentially lowering your individual income below the $95,323 threshold.
- Manage Capital Gains: Consider spreading the sale of assets over multiple years to avoid a massive income spike in a single tax year.
- Delay OAS Enrollment: You can choose to delay your OAS until age 70. This increases your monthly benefit by 36% and allows you to draw down other taxable assets (like RRSPs) first, potentially lowering your future income when you finally start the pension.
- Adjust RRSP Contributions: If you are under 71 and still working, contributing to an RRSP can lower your net income, helping you stay under the recovery threshold.
How the 2026 Calculation Works
The calculation is straightforward: the CRA takes your total income, subtracts the $95,323 threshold, and calculates 15% of the remainder.
For example, if an individual earns $100,000 in 2026, they are $4,677 over the threshold. The recovery tax would be 15% of $4,677, which equals $701.55. This amount would then be deducted from their monthly OAS payments starting in July 2027.
Monitoring your income throughout the year and adjusting your withdrawal strategies is the most effective way to protect your retirement benefits from the 2026 OAS recovery tax.
Frequently Asked Questions
What is the OAS clawback threshold for the 2026 income year?
The minimum income threshold for the 2026 tax year is $95,323, meaning income above this amount triggers a 15% recovery tax.
Does TFSA income affect my OAS clawback?
No, withdrawals from a Tax-Free Savings Account (TFSA) are not considered taxable income and do not count toward the OAS recovery tax threshold.
When is the OAS recovery tax actually deducted from my payments?
The recovery tax based on your 2026 income will be deducted from your monthly OAS checks between July 2027 and June 2028.
Ben Lee is a content writer specializing in government schemes and public benefit programs, delivering clear and up-to-date information to help readers understand eligibility, payments, and policy changes.