Retirement guide

OAS Clawback in Plain English

2026 income-year limits, a worked example, payment timing, start-date choices, and how to apply.

Income year2026OAS recovery tax
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Core rule: For the 2026 income year, recovery tax begins when an individual's net world income exceeds $95,323. The recovery rate is 15% of the excess, limited to the OAS received.

2026 recovery limits

Item2026 income year
Recovery starts$95,323
Recovery rate15%
Estimated full recovery, age 65–74$155,109
Estimated full recovery, age 75+$161,088
Recovery period affected by 2026 incomeJuly 2027 to June 2028

“Estimated full recovery” is the approximate income level where recovery tax equals the person's annual OAS. Quarterly indexing can move the precise level. Approximate formula: starting threshold + annual OAS entitlement ÷ 15%.

Income that may trigger recovery tax

  • Employment and self-employment income
  • CPP and taxable pension income
  • RRSP and RRIF withdrawals
  • Taxable investment and rental income
  • Taxable capital gains and other amounts included in net income

TFSA withdrawals are not taxable income and do not directly trigger OAS recovery tax.

Worked example: $123,000 of 2026 income

CalculationAmount
2026 net world income$123,000
Less threshold($95,323)
Income above threshold$27,677
Recovery tax: $27,677 × 15%$4,151.55

With an illustrative OAS payment of $705 per month ($8,460 annually), estimated OAS remaining would be $4,308.45, or $359.04 per month.

Why 2026 income affects 2027–28 payments

The $4,151.55 recovery based on 2026 income is used from July 2027 through June 2028—an indicative deduction of $345.96 per month. If actual 2027 income drops, final recovery tax may be lower or zero even though deductions initially reflect the earlier high-income year. Form T1213OAS can request lower withholding when current income has fallen substantially.

When to start OAS

No application month permanently avoids clawback. Choose a start date using retirement cash flow, longevity, tax, GIS eligibility, and the value of deferral. OAS rises by 0.6% for each month deferred after 65, to a maximum 36% at 70.

Illustrative 2027 versus 2028 break-even

Starting July 2027 at $359.39 for 12 months, then $705, provides $4,312.68 before a delayed option begins. Delaying to July 2028 at $774.23 creates a $69.23 monthly advantage. The simplified break-even is about 62.3 months after July 2028—approximately September 2033. This ignores indexing, income tax, investment returns, changing clawback exposure, GIS, and survivor considerations.

How to apply

Many people are automatically enrolled and receive a letter around age 64. Otherwise, or to choose a different date, apply through My Service Canada Account or by mail using Form ISP-3550. If prior-year income creates withholding but current income has fallen, consider Form T1213OAS; approval is not automatic.

Official sources

Educational illustration only—not tax or legal advice. Confirm current OAS rates and thresholds before making a start-date decision.