OAS clawback: how the recovery tax is calculated and withheld

How the OAS clawback works

The OAS clawback is a repayment of your own pension once your income is high enough. The CRA and Service Canada call it the OAS pension recovery tax. You repay 15% of the amount by which your net world income for the year exceeds the threshold, and the repayment can never be more than the OAS you received.

Net world income here means your net income from your tax return, with a few adjustments, and it includes the OAS pension itself. Each spouse is tested separately on their own income. A couple where each partner has $80,000 of income pays no clawback, while a single earner with $160,000 loses the whole pension.

OAS recovery tax thresholds for 2025 and 2026 income

Each threshold applies to one income year, and the resulting deductions are taken from payments over the following July to June. This lag is the main reason people are surprised by the clawback: a high-income year shows up in their deposits a year and a half later.

Service Canada notes that the upper limits for the current tax year are estimates based on maximum OAS amounts from January to September and become final in October, so the 2026 figures above are now final. The OAS clawback threshold page tracks each year's figures in more detail.

How much is the OAS clawback? Worked examples

The math uses the same three steps every time: subtract the threshold from your net world income, take 15% of the difference, then divide by 12 to see the monthly deduction. These examples use 2025 income, so the deductions apply from July 2026 to June 2027.

Take the $110,000 case. A 70-year-old with that net income keeps about $556 of the $762.50 October 2026 maximum each month, before any income tax withholding. Service Canada's own example uses $100,000 of income, which produces a $981.90 repayment for the year.

How the OAS recovery tax is withheld each month

Most people never write a cheque for the clawback. It is collected in two ways that work together: an estimate withheld from each deposit, and a final settling up on the tax return.

1. You file your 2025 return. The CRA uses your 2025 net income to estimate the next year's repayment.
2. From July 2026 to June 2027, Service Canada deducts one-twelfth of that estimate from every OAS payment and sends you a letter showing the deduction.
3. Each winter your T4A(OAS) slip shows the recovery tax withheld during the calendar year in box 22.
4. On your return, you work out the actual repayment for the year on line 42200, with the matching deduction on line 23500, using the Federal Worksheet chart.
5. You claim the box 22 amount as tax already paid on line 43700. If too much was withheld, it comes back as part of your refund; if too little, you owe the difference.

The CRA specifically says not to claim the box 22 amount on line 23200. Box 22 is tax already paid, so it belongs with your other tax deducted on line 43700.

Ways the clawback can change from year to year

Your income drops after a high year

If your 2025 income was above the threshold but you expect 2026 income to be substantially lower, for example after retiring, you can ask the CRA in writing to reduce the deductions starting July 2026. Use Form T1213(OAS), Request to Reduce Old Age Security Recovery Tax at Source.

A one-time spike in income

A large RRSP withdrawal, a capital gain or a severance payment in one year can push income over the threshold only once. The deductions then run for the following July to June, and the T1213(OAS) request is how you stop them early if the next year's income will be lower.

You live outside Canada

Most OAS recipients who live outside Canada must file an Old Age Security Return of Income by April 30 each year, unless they live in a country on the CRA exemption list. If it is not filed, OAS payments stop beginning in July. The combined non-resident tax and recovery tax can never be more than your OAS.

Can you avoid the OAS clawback?

You cannot opt out of the rule, but timing matters. People who expect high income in their late 60s, often because they are still working, sometimes choose to delay OAS. A pension you have not started cannot be clawed back, and each month of delay adds 0.6%. Our OAS deferral page shows the numbers.

Past that, planning the timing of large withdrawals so they do not all land in one year keeps more income below the threshold. For how the clawback shows up alongside other deductions in your deposit, see how much OAS is per month, and check the OAS payment dates for when the July change takes effect.