The OAS clawback explained: how the recovery tax works in 2026

What the OAS recovery tax is

The OAS pension itself is taxable income. On top of regular income tax, anyone whose net world income passes a yearly threshold repays part of their OAS. The repayment is 15% of the income above the threshold, and it stops once the entire OAS pension has been repaid.

Because it is calculated on individual net income, each spouse is tested separately. One spouse can be in the clawback range while the other keeps every dollar of their OAS. That detail matters for couples, and it is one reason pension income splitting comes up so often in clawback discussions.

The threshold is set for each income year, and the OAS amount itself is adjusted quarterly for inflation. Both are listed with their dates on our key figures page.

It helps to keep two ideas apart. The recovery tax doesn't shrink your OAS before it's paid in the way an income-tested benefit does; it's a separate tax worked out from your return. The practical effect is similar, though: once income passes the threshold, part of the OAS you received is handed back.

The thresholds for 2024 to 2026

The minimum income threshold has risen each year. The upper end of the range — where OAS is fully recovered — depends on the OAS amount, which is why it differs by age group and why the 2026 figures are estimates.

A worked example: Margot and Bill in Alberta

Suppose Margot, 68, lives in Calgary and has $115,000 a year of other taxable income from a workplace pension and RRIF withdrawals. She also receives the full OAS of $762.50 a month (October–December 2026 rate), or $9,150 a year at that rate. Her net income for the clawback test is therefore $124,150.

Margot's income is $28,827 above the 2026 threshold of $95,323. At 15%, her recovery tax works out to about $4,324 for the year — roughly $360 a month of her OAS repaid.

Now compare her neighbour Bill, 67, with $80,000 of other income. Adding the same $9,150 of OAS brings him to $89,150, below the threshold, so Bill keeps all of his OAS.

The live table below holds Margot's other income at $115,000 every year and adds up OAS received to age 90, in today's dollars. Starting OAS at 65, her lifetime OAS would total about $242,475 before the clawback, with about $110,160 recovered, leaving about $132,315. Starting at 70, the larger deferred pension totals about $267,546, with about $99,163 recovered, leaving about $168,383.

The effective tax rate inside the clawback range

The clawback matters most at the margin. Using the calculator's 2026 Alberta estimate, Margot's combined federal and provincial marginal rate at $124,150 is about 36%. Add the 15% recovery and each additional dollar she withdraws costs her roughly 51 cents.

Bill, at $89,150, has an estimated marginal rate of about 31% and no recovery tax. The gap between their marginal rates is driven mostly by the clawback, not by the tax brackets alone.

These estimates leave out the age amount, the pension income amount and other credits, so actual figures will differ. The point is the shape: inside the clawback band, income is taxed more heavily than the brackets on their own suggest. The OAS clawback calculator lets you see where your own income lands.

How the recovery tax is collected

The recovery tax is settled on your annual tax return. In addition, Service Canada may withhold part of each monthly OAS payment based on income reported on earlier returns, so a high-income year can affect payments in a later period.

If your income drops — for example, after a one-time RRSP withdrawal year — the withholding may be more than what you end up owing, and the difference is generally sorted out when you file. The timing rules are specific, so confirm how they apply to you with the CRA or Service Canada.

For someone whose income is steady from one year to the next, the amount withheld and the amount finally owed tend to line up closely. Mismatches show up mostly around big changes — the year you retire, sell a cottage or take a large lump sum from an RRSP.

Which income counts and which doesn't

The test uses net world income, which generally includes:

Deductions matter too, because the test uses net income rather than total income. Items such as RRSP contributions, if you can still make them, reduce net income. Confirm which deductions apply to your situation with the CRA.

• CPP and OAS pensions, workplace pension income and RRIF or RRSP withdrawals.
• Employment and self-employment income, rental income and interest.
• Dividends and the taxable part of capital gains (dividends are included at their grossed-up amount — check the details with the CRA).
• Not included: TFSA withdrawals, which don't count as income and so have no effect on OAS or GIS.

Couples, Quebec and the per-person test

Because each spouse is tested separately, a couple with $180,000 of combined net income could see very different results depending on how it's divided. If one spouse had $150,000 and the other $30,000, the first would be well into the recovery range while the second would be far below it. Divided evenly at $90,000 each, neither would reach the 2026 threshold of $95,323.

Tools that move income between spouses include pension income splitting for eligible pension income, CPP pension sharing and, over a longer horizon, spousal RRSPs. Each has its own rules and timing, which our couples page brings together.

OAS and its recovery tax are federal, so they work the same way for Quebec residents. Our tax estimates, however, don't include Quebec provincial income tax, so the combined marginal rate shown for other provinces won't match a Quebec return.

Trade-offs people weigh

Several planning choices can change where income lands in a given year. Each comes with trade-offs, and none is right for everyone.

Some people draw more from RRSPs in their early 60s, before OAS starts, to lower later RRIF minimums — the idea behind an RRSP meltdown. Couples may split eligible pension income so that neither spouse crosses the threshold. Others lean on TFSA withdrawals in years with large expenses. Deferring OAS raises the monthly amount but also increases the OAS that could be recovered later.

Our withdrawal order guide shows how these pieces interact over a full retirement rather than one year at a time.