Retirement income
How do I avoid the OAS clawback?
Short answer
Keep your individual net income below the OAS recovery threshold, which is $95,323 for 2026. Above it, you repay 15% of the excess, never more than the OAS you received. The main tools are smooth withdrawals over many years and TFSA withdrawals in high-spending years. Pension income splitting and care with dividends and one-time gains also help.
What is the OAS clawback?
The clawback is the OAS pension recovery tax. OAS is taxable, and you repay part of it when your individual net income is above a yearly threshold.
The threshold was $93,454 for 2025 income and is $95,323 for 2026 income. You repay 15% of your net income above it, but never more than the OAS you received for the year.
At very high incomes, OAS stops entirely. You receive no OAS for October to December 2026 if your 2025 net world income was $152,062 or more at age 65 to 74. At 75 and over, the figure is $157,923.
Why does one big withdrawal cause it?
Say you take a large sum from your RRSP or RRIF in a single year. You pay income tax on the withdrawal. The extra income can also push you over the threshold, so part of your OAS is taken back.
That is two layers of cost from one decision. Buying a vehicle, helping a child or renovating is fine. Lumping the cost into one year is the costly part.
How can I keep my income under the threshold?
Plan your reported income, not just your spending. These moves come up again and again:
- Spread withdrawals smoothly across many years, rather than lurching between feast and famine.
- Draw from your TFSA in a high-spending year. TFSA withdrawals are not income and do not add to the recovery tax.
- Draw your RRSP or RRIF down steadily in early, lower-income years, so it does not balloon and force large withdrawals later.
- Spread a large expense across two calendar years. Ask your tax preparer to work it out both ways.
- Plan as a couple. You can allocate up to 50% of eligible pension income to a spouse or partner on Form T1032. RRIF payments qualify at 65 and over.
- Hold an annual review to check whether a small change to your withdrawals keeps you under the threshold.
Do dividends and capital gains count?
Yes, and dividends count for more than you receive. Each dollar of eligible Canadian dividends adds $1.38 to your net income. Each dollar of other Canadian dividends adds $1.15.
A dollar of capital gain adds 50 cents. If your income is near the threshold, ask your adviser before you choose dividend-paying investments.
For farm families, land sales and gains are best spread across years planned around the pension, not stacked on top of it.
What if my high income was a one-time event?
Service Canada holds back part of each OAS payment from the following July, based on your income. Was the high income a one-time event, such as selling a cabin? Then you can ask CRA on Form T1213(OAS) to reduce what is held back.
Deciding when to start OAS is a separate choice. Each month you defer raises the payment. But if you or your spouse defer OAS, you are not eligible for Alberta's seniors financial assistance programs while you wait. You can compare start dates with our OAS timing calculator at /tools/#oas-timing.
Related questions
Is the OAS clawback based on household income?
No. It is based on your individual net income. Couples can still lower one spouse's income through pension income splitting.
Do TFSA withdrawals count toward the OAS clawback?
No. TFSA withdrawals are not income, so they do not add to the OAS recovery tax.
Can a RRIF at death trigger the OAS clawback?
Yes. Unless it passes to a spouse or partner, a RRIF's full value is income in the year of death. That can trigger the OAS recovery tax on the final return.
Drawn from Legacy Planning in Care, Chapter 2. Income in care; also TaxOnTax: The 12Event Planning Model, Event 3: The Long Goodbye to a Paycheque, by Derik Godbout, PBA, CEA, DMA. Reviewed October 2026. General information, not advice for your situation; rules and amounts change, so confirm current figures before you act.
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TaxOnTax™ Advisory Ltd. is a tax planning, accounting and executor advisory practice that also provides plain-language tax education. Derik Godbout is a PBA, CEA and DMA, Personal Tax Services Specialist™, not a CPA, lawyer, registered investment adviser, or licensed insurance professional. Nothing on this site constitutes personalized tax, legal, investment, or insurance advice. Always consult a qualified professional before acting on any information.