What is the OAS clawback threshold?

In 2026, the OAS clawback begins at $95,323 of net income. You lose 15 cents of OAS for every dollar above the threshold. Your entire OAS is eliminated at approximately $155,300 of net income (ages 65 to 74).

What income counts for the OAS clawback?

Almost all income counts: RRSP/RRIF withdrawals, CPP, employment income, pension income, interest, dividends, capital gains, and rental income. TFSA withdrawals do NOT count, which makes the TFSA the best tool for avoiding the clawback.

How can I reduce my OAS clawback?

The most effective strategies are: (1) RRSP meltdown before age 72 to reduce future RRIF minimums, (2) maximize TFSA throughout your career, (3) pension income splitting with your spouse, (4) delay OAS to age 70 if you'd lose it to clawback anyway, and (5) control income timing year by year.

Does the OAS clawback apply to TFSA withdrawals?

No. TFSA withdrawals are exempt from the OAS clawback calculation. That is why planners recommend the TFSA for retirees who expect to be near or above the clawback threshold.

OAS Clawback: How It Works and How to Avoid It

Tax bracket map showing a retiree’s taxable income above the OAS clawback threshold — A retiree's taxable income against the tax brackets and the OAS clawback threshold, year by year.

The Old Age Security clawback is one of the harshest tax provisions in Canadian retirement. Once your net income exceeds the threshold ($95,323 in 2026), you lose 15 cents of OAS for every dollar over it. At roughly $155,300 of net income, your entire OAS benefit is gone. Combined with your marginal tax rate, the effective rate in the clawback zone can reach 58–61% in some provinces. Any retiree with a reasonable RRSP balance and a pension can be affected.

How the Clawback Works

OAS is a universal benefit available to Canadian residents at age 65 (or up to 70 if deferred). The maximum monthly benefit in 2025 is approximately $727 (age 65) to $1,032 (age 70 with deferral credits). It’s funded by general tax revenue, not contributions, and everyone who meets the residency requirements qualifies. Full eligibility rules are published on the Old Age Security program overview from the Government of Canada.

The clawback, formally called the “OAS Recovery Tax,” applies when your net income on line 23600 of your tax return exceeds the threshold. The Government of Canada publishes the current OAS recovery tax thresholds and calculation rules:

2026 threshold: $95,323
Clawback rate: 15% of income above the threshold
Full repayment: ~$155,300 at ages 65 to 74 (entire OAS clawed back)

The 15% recovery tax is on top of your regular income tax. In Ontario, income just above the threshold is taxed at about 31.7% (federal 20.5% + Ontario 11.16%), so the clawback lifts the effective marginal rate to about 46.7%. In Quebec it can pass 50%.

What Counts as Income for the Clawback

Almost everything:

RRSP/RRIF withdrawals
CPP/QPP benefits
Employment and self-employment income
Pension income (DB, DC, annuities)
Interest, dividends, and capital gains
Rental income
Foreign income

What doesn’t count:

TFSA withdrawals (the single most important planning lever)
GIS payments
Workers’ compensation payments

That is why the TFSA is the best anti-clawback tool. Every dollar of spending funded from the TFSA instead of the RRIF keeps your net income lower.

Five Strategies to Reduce or Eliminate the Clawback

1. RRSP Meltdown Before Age 72

The most effective strategy. Between retirement and age 71, withdraw from your RRSP steadily to fill lower tax brackets, ideally before CPP and OAS start adding to your income. Every dollar you melt down in the 20–30% bracket range is a dollar that won’t be forced out as a RRIF minimum at 40–50%+ effective rates later.

If you can withdraw at a 30% combined rate now versus about 47% later (income tax plus clawback), you save about 17 cents on every dollar.

2. Maximize TFSA Throughout Your Career

TFSA withdrawals don’t count as income for any income-tested benefit. A retiree with $300,000 in a TFSA can fund $15,000–$20,000 of annual spending without affecting OAS, GIS, or the age credit. This is the strongest argument for a TFSA over an RRSP in many situations, especially for middle-income earners who will face clawback risk.

3. Delay OAS to Age 70

OAS deferral increases your benefit by 0.6% per month (7.2% per year) past age 65. Delaying to 70 gives you 36% more OAS, roughly $263/month extra. For clawback planning there is another reason: if your income from 65 to 70 is high (large RRIF minimums, pension), you’d lose much of the OAS to clawback anyway, so delaying avoids collecting a benefit you’d hand back.

Once your RRSP meltdown is complete and income drops, start collecting the enhanced OAS at 70 while drawing from TFSA and non-registered accounts.

4. Pension Income Splitting

If you’re married or common-law, you can allocate up to 50% of eligible pension income to your lower-income spouse. This directly reduces your net income on line 23600. Pension splitting is automatic in cinder.fi’s projection, which optimizes the split to minimize combined household tax including the clawback.

5. Income Timing and Sequencing

In any year, you can control:

Defer capital gains realizations to years when income is lower
Use TFSA withdrawals in high-income years, registered withdrawals in low-income years
If you’re near the threshold, check whether a RRIF withdrawal just above the minimum and below the clawback level saves more in OAS than it costs in deferred tax

The GIS Connection

For lower-income retirees the stakes are higher. The Guaranteed Income Supplement has its own clawback at much lower income levels, and the combined GIS and OAS clawback can create effective marginal rates above 70%. Retirees near the GIS threshold should draw almost entirely from the TFSA.

Example: Margaret, Retired at 63 in Ontario

Margaret has $700,000 in her RRSP, $80,000 in her TFSA, and a small DB pension of $18,000/year. CPP at 65 will be $14,400/year and OAS about $8,900/year. The figures below assume 5% growth and are in today’s dollars (the threshold and her benefits both rise with inflation).

Without meltdown planning: Untouched, her RRSP grows to about $1,086,000 by 72. The 5.40% RRIF minimum is about $58,600. Add CPP ($14,400), OAS ($8,900) and the pension ($18,000) and her income is about $99,900, roughly $4,600 over the $95,323 threshold, so about $700 of OAS is clawed back. By 78 the minimum (6.36%) is about $64,800, income is about $106,100, and the clawback is about $1,600 a year and still rising.

With meltdown from 63 to 71: She withdraws $45,000/year from the RRSP, taxed at about 31.7% combined (federal + Ontario) at her income level. By 72 the balance is about $565,000 and the RRIF minimum is about $30,500, for total income of about $71,800. At 78 it is about $75,000. She stays well below the threshold and keeps her full OAS.

The meltdown years cost more tax up front. Whether it wins over a lifetime depends on returns, how long she lives and what her estate pays on the RRIF at death, which is what a full projection is for.

How cinder.fi Helps

cinder.fi models the OAS clawback in its Canadian tax engine using the actual line 23600 calculation with RRIF income, CPP, pension, capital gains, and all other sources. The projection shows which years you’ll hit the clawback, how much OAS you’ll lose, and your effective marginal rate in those years. The RRSP meltdown toggle models systematic drawdowns to stay below the threshold. The Strategy Optimizer searches withdrawal orders and meltdown amounts for the combination that preserves the most OAS while minimizing income tax. Because CPP counts toward the threshold, the age you start CPP changes which years you cross it.

See your OAS exposure: try cinder.fi free.

April 8, 2026 · 5 min read