Most people meet the OAS clawback the same way. A deposit shows up smaller than last month’s, nobody warned them, and the explanation arrives afterwards.
It’s worth understanding before that, because it’s one of the very few tax rules you can genuinely plan around.
How it works, in plain language
Once your net income passes a floor, the government takes back fifteen cents of OAS for every dollar above it. Keep going and it takes back all of it.
For the 2026 income year, the clawback starts around $95,323 and OAS is gone entirely around $155,109 if you’re between sixty-five and seventy-four, or around $161,088 at seventy-five and over.
Two things people get wrong about that.
It isn’t a cliff. Between those two numbers you keep part of your OAS, on a slope. Crossing the floor by a thousand dollars doesn’t cost you the pension, it costs you a hundred and fifty dollars of it. Worth knowing before you panic and restructure everything.
And it’s net income, not taxable income after credits, and not just RRIF withdrawals. Rent counts. Capital gains count. A dividend from your corporation counts, and eligible dividends count at their grossed-up amount, which is higher than what actually landed in your account. That last one catches people every year.
The lag is the useful part
Here’s the bit that turns it from a nuisance into a lever.
The clawback that shows up in your OAS deposit is driven by your income from the year before last.
Your 2026 income governs the OAS you receive from July 2027 through June 2028.
Read that again, because it’s doing a lot of work. A withdrawal you take this year sets an OAS deposit two summers from now. You know today what next-next-year’s answer will be, and you have a whole year to decide what to do about it.
Almost nothing else in the tax system gives you that much runway.
What people do with it
The obvious move is smoothing. Rather than a quiet year followed by a big withdrawal year, you spread the same money across both and stay under the floor in each.
The less obvious one is the order you draw from. TFSA withdrawals don’t count as income at all, so they don’t touch the clawback. Non-registered money is partly return of your own capital, so only the growth shows up. A RRIF withdrawal is fully in.
That means the same amount of spending money can produce very different net income figures depending on which account it came out of. That’s the whole game, and it’s decided years before anyone notices.
Then there’s the one that surprises people. Sometimes taking more out early is right. Draw the RRSP down in your sixties, before CPP and OAS and the forced RRIF minimums are all stacked on top of each other, and you can end up in a lower bracket across the whole retirement even though you paid more tax in year one.
We’re not saying that’s your answer. It depends on your numbers. We’re saying it’s a real option that almost nobody is shown, because it looks wrong from the inside of any single year.
The forced part
Two things arrive whether you want them or not.
Your RRSP has to become a RRIF (or an annuity) by the end of the year you turn seventy-one. From then on there’s a minimum you must withdraw, set by age. At seventy-one it’s 5.28%. By eighty it’s 6.82%. By ninety, 11.92%. At ninety-five and over, 20%.
That’s taxable income landing whether you spend it or not, and it goes straight into the net income figure the clawback reads. Left uninvested it can also push you into a higher bracket entirely.
Which is why the decision about what happens to the excess — into a TFSA, into a non-registered account, or simply spending less than the minimum — is worth making before the first forced withdrawal, not after it.
Three things to check
Find your last notice of assessment and look at the net income line. Not gross. Net.
Then look at what’s arriving in the next three years that isn’t there yet. CPP if you haven’t started it. OAS. RRIF minimums if you’re near seventy-one. Rent from a property. A dividend from a corporation you’re winding down.
Then find your TFSA balance, because it’s the only tap in the system that doesn’t register at all.
Those three numbers together tell you whether the clawback is going to be a factor for you, and roughly when. If it is, you’ve got two years of runway to do something about it, which is more warning than most tax problems give you.
We’ve been doing the tax side of this since the early nineties, and this is one of the few rules where knowing it early genuinely changes the outcome rather than just explaining it afterwards.
When did someone last show you which year your withdrawals are actually setting?