Old Age Security is Canada’s near-universal retirement benefit, and it comes with an income test. Above a threshold, you repay 15 cents of OAS for every dollar of net income. That is the OAS recovery tax, universally called the clawback.
Search for the threshold and you will find conflicting figures. Both are usually correct.
The two numbers
$93,454 governs the OAS payments you receive from July 2026 to June 2027, assessed against your 2025 net income.
$95,323 is the threshold for the 2026 income year, which will drive your payments from July 2027.
Neither is wrong. If a source quotes one without saying which period it refers to, treat the whole article with caution.
The reason for the lag is administrative: OAS payment years run July to June and are based on the previous calendar year’s tax return. So there is always a roughly eighteen-month gap between earning the income and feeling the effect — which is precisely what makes planning possible, if you see it coming.
What counts, and what does not
The test is net world income, line 23600 of your return.
RRSP and RRIF withdrawals · CPP and OAS payments themselves · employment and self-employment income · workplace pension income · rental income · interest and grossed-up Canadian dividends · the taxable half of capital gains
TFSA withdrawals · GIS payments · the non-taxable half of capital gains · proceeds from selling your principal residence · the return of your own RESP contributions
That first exclusion is the most important line in this article, and I will come back to it.
Why a large RRSP creates the problem
You must convert your RRSP by the end of the year you turn 71, usually to a RRIF. After that, minimum withdrawals are mandatory and rise with age. That income arrives whether you want it or not.
Consider someone who did everything right — maximised their RRSP for thirty years and reached 72 with an $800,000 RRIF. Their mandatory minimum that year is roughly $43,000. Add CPP, OAS itself and any workplace pension, and they are past the threshold before making a single discretionary decision.
They then pay ordinary income tax on that money plus the 15% recovery on the excess. The effective marginal rate on those dollars is considerably higher than they expect.
Why the TFSA matters so much here
Because TFSA withdrawals are invisible to the calculation. A retiree drawing $30,000 a year from a TFSA has $30,000 of spending power and zero effect on their OAS. The same $30,000 from a RRIF counts in full.
This is why the RRSP-versus-TFSA decision you make in your forties has consequences in your seventies, and why building both — rather than only the account with the immediate deduction — is usually the more robust plan.
The planning window most people waste
The years between retiring and starting CPP and OAS are frequently the lowest-tax years of your life. That window is the natural time to draw RRSP money down, or convert it, at low rates — reducing the mandatory RRIF withdrawals that would otherwise push you over the threshold later.
Many people spend those years living off savings and taking nothing from the RRSP, because it feels prudent. Then the mandatory withdrawals arrive and the clawback with them. Deliberately drawing more early can reduce total lifetime tax, which is counterintuitive enough that it rarely happens by accident.
Other things that help
Pension income splitting can move income to a lower-earning spouse, keeping both below the threshold. RRIF income generally qualifies from age 65.
Deferring OAS to 70 increases the eventual benefit and avoids the clawback during high-income years — useful if you are still working past 65.
Timing large capital gains matters, because a single big realisation can push one year’s income over the line and cost you OAS you would otherwise have kept.
A closing thought worth holding onto
Being clawed back is not automatically a planning failure. It means your income is comfortably above the threshold, which is not the worst problem to have. The failure is being clawed back by surprise, in a year where a different withdrawal decision would have avoided it.
If you are within about ten years of retirement, projecting your income sources year by year is the exercise that surfaces these pressure points while there is still time to act on them.