OAS clawback 2026: the $90,997 threshold and how to dodge it

How the OAS clawback works

The Old Age Security Recovery Tax (the "clawback") is an income-tested reduction to your OAS pension.

2025 numbers (2026 numbers TBC in early 2026): • Threshold (start of clawback): $90,997 net income • Clawback rate: 15% of income above the threshold • Full clawback (zero OAS): $148,451 (age 65-74), $151,668 (age 75+) • Maximum OAS: $727.67/month at age 65; $800.44/month at 75+ • Annual OAS: $8,732 at 65; $9,605 at 75+

2026 projection: • Threshold likely ~$93,500 (indexed to CPI) • Full clawback at ~$152,500

Mechanics: 1. CRA looks at your net income (line 23600) from last year's return 2. If above threshold, calculates clawback: (net income - threshold) × 15% 3. CRA reduces your monthly OAS payments for July - June of the following year 4. Reconciled at tax-filing time the following year

Worked example - $120K net income retiree (2025 figures): • Excess over threshold: $120,000 - $90,997 = $29,003 • Clawback: $29,003 × 15% = $4,350/year • Annual OAS: $8,732 - $4,350 = $4,382 • Effective monthly OAS: $365 instead of $728

What counts as "net income" for clawback

CRA uses net income (line 23600) for the clawback calculation. This includes:

Counted in net income: • CPP / QPP • OAS itself (yes, OAS counts toward determining its own clawback) • RRIF / annuity / RRSP withdrawals • Employer pension (DB/DC plans) • Employment income (yes, you can have it after 65) • Self-employment income • Dividends (grossed up under integration) • Interest income • Net rental income • Net capital gains (50% inclusion)

NOT counted in net income: • TFSA withdrawals ← critical for OAS planning • Return of capital from investments (e.g., REIT ROC) • Gifts and inheritance received • GST/HST credit, CWB, CCB and other federal benefits

This is why TFSAs are critical to high-net-worth retirement planning: every dollar pulled from TFSA = $0.15 of OAS preserved (or more, when state programs like GIS clawbacks are layered in - which add another 50% effective rate for low-income seniors).

Pension income splitting: the biggest lever

What it does: allows you to attribute up to 50% of eligible pension income to your spouse/common-law partner, lowering YOUR net income (and theirs higher).

Eligibility: you must be 65+ and have eligible pension income.

What qualifies as eligible pension income (at age 65+): • RRSP annuity payments • RRIF withdrawals (after 65) • Employer pension (DB/DC) • CPP/OAS are NOT eligible for splitting (they have their own splitting mechanism)

Worked example - both spouses 65+, retired, sole earner has $140K from RRIF + CPP + OAS:

Without splitting (status quo): • High-income spouse net income: $140,000 • OAS clawback: ($140K - $91K) × 15% = $7,350 • Other spouse: $0 income • Total household tax: ~$28,000 + $7,350 OAS clawback

With 50% pension splitting: • High-income spouse net income: $70,000 (after $70K split off to spouse) • OAS clawback: $0 (under threshold) • Other spouse: $70,000 (eligible pension portion) • Their OAS clawback: $0 • Total household tax: ~$22,000 + $0 clawback

Saving: ~$13,350/year

How to apply: each year, when you file your tax return, complete Form T1032 (Joint Election to Split Pension Income). Decide annually - you can split a different amount each year based on what optimizes total tax.

Deferring OAS to 70: a 36% boost

You can defer starting OAS from age 65 to as late as age 70. Each month of deferral adds 0.6% to your eventual OAS payment.

• Defer 5 years (start at 70): 36% higher OAS for life

2026 numbers: • OAS at 65: ~$727/month • OAS at 70 (deferred): ~$989/month • Annual difference: $3,144/year, for the rest of your life

Breakeven point: roughly age 82. If you live past 82, deferring wins. If you don't expect to, take it early.

OAS deferral + clawback strategy: deferring OAS to 70 has a hidden benefit - you have 5 years (65-70) to: • Draw down RRSP/RRIF aggressively at low tax brackets • Reduce your future RRIF mandatory withdrawals (which would otherwise spike net income at 71+) • Get below the OAS threshold by the time OAS finally starts

This "RRIF meltdown" strategy is powerful for retirees with $1M+ in RRSPs: • Stop RRSP contributions at 55-60 • Convert to RRIF voluntarily at 65 (mandatory at 71) • Withdraw $80-100K/yr from age 65-70 at moderate brackets • Reduce RRIF balance from $1M → $400K by 71 • Mandatory RRIF withdrawals at 71 are now ~$22K instead of $55K • OAS clawback minimized for the rest of retirement

Other strategies for high-income retirees

1. TFSA priority for withdrawals: every dollar from TFSA doesn't count toward net income. If you have both TFSA and non-registered savings, draw TFSA first to stay under the OAS threshold.

2. Spousal RRSP set-up (pre-retirement): contribute to spouse's RRSP during working years if you expect them to be a lower-income retiree. Income comes out under their tax rate, dodging the clawback.

3. Capital gains realisation in low-income years: realize big capital gains in years when your income is otherwise low (e.g., between retirement and OAS start). Stay just under the OAS threshold each year.

4. Move to a lower-cost province pre-65: Alberta has the lowest top combined rate (48%), no provincial sales tax, and lower property tax than ON/BC/QC. A move at 60 can save $10-15K/year in retirement.

5. Holding company structures: if you have a small business, holding back retained earnings in a holdco and drawing as dividends in retirement can be tax-efficient. Dividends count toward net income but get the dividend tax credit.

6. Charitable donations: large donations get a 33% federal credit + provincial. Can offset high-income years and reduce net income substantially.

7. Defer the FIRST RRIF withdrawal year: you can convert RRSP to RRIF anytime up to age 71. If you convert at 70, you can take the first mandatory withdrawal up to year-end of when you turn 72 - giving you flexibility to time it across two tax years.