Asset location for GIS recipients: why account type matters more than threshold timing
A married couple with $2 million in registered and non-registered savings can lose $11,200 in Guaranteed Income Supplement (GIS) benefits each year by putting their bonds in the wrong account. That number comes from a published piece I wrote in early 2025 using the clawback threshold that applied at the time. The threshold has since moved, and the location decision has moved with it.
The GIS clawback begins when your income crosses a specific dollar figure. In 2026, a couple where both receive full OAS has a combined income threshold of approximately $29,760. The GIS income thresholds vary by household situation. The shift matters because the GIS benefit phases out at 50 cents per dollar of income above the threshold, and the withdrawal rate compounds with provincial top marginal tax rates to create an effective tax rate above 70% in some brackets. When the threshold moves, the income you can take before hitting that wall moves with it.
Why the threshold dictates where you hold fixed income
Interest income from bonds, GICs, and bond funds held in non-registered accounts counts as income for GIS purposes. Registered Retirement Income Fund (RRIF) withdrawals count as well. Tax-Free Savings Account (TFSA) withdrawals do not. Canadian dividends receive a tax credit that reduces their effective contribution to the clawback, but interest counts at face value.
For a retiree couple with $2 million split between RRSPs and non-registered accounts, holding fixed-income assets in the TFSA and equities elsewhere is the default strategy. The TFSA shields the interest income from both tax and the GIS clawback. If you reverse it, bonds outside, equities inside, the interest shows up as income, reduces your GIS, and triggers tax at the top rate.
The 2026 threshold gives you an additional $1,869 of income room before the clawback begins. That room does not change the ranking of which account holds which asset. It changes how much income you can generate before you need to start managing the location decision carefully.
What changed in practice
A couple with $500,000 in fixed income earning 4% generates $20,000 in annual interest. If that income sits in a non-registered account and pushes total income to $100,000, depending on their household GIS situation, they may be subject to significant clawback. At the 50% GIS reduction rate, the benefit loss would depend on the actual threshold applicable to the couple's situation. The penalty depends on the couple's specific household GIS scenario and income composition.
The strategy was already to hold interest-generating assets in TFSAs and RRIFs where possible, and equities in non-registered accounts where capital gains and Canadian dividends receive preferential treatment. What has changed is the margin of safety. Couples close to their applicable GIS threshold may benefit from reviewing their account structure.
The wedge between years
If you are planning asset location for a client turning 65 in 2026, confirm the applicable GIS threshold based on their household marital and OAS status. If the couple turned 65 in 2025, they lived through a year under the lower threshold and need to know both numbers. Any income projection that runs across the 2025-2026 boundary has to account for the jump midway through.
The GIS is recalculated annually based on prior-year income. A couple whose prior-year income falls below their applicable GIS threshold qualifies for GIS in the following year. A couple whose current-year income falls below their applicable GIS threshold continues to qualify for GIS in the following year. When the threshold rises, the clawback does not apply retroactively to prior years, which means you have slightly more room going forward.
Asset location is one of the few levers that improves outcomes without requiring you to take more risk or accept less income. Threshold changes, when they occur, do not alter the fundamental asset location strategy. It changes how much income you can draw before the cost of holding them in the wrong place becomes material.
If you're close to the threshold or planning retirement income for 2026, contact me. We'll confirm where you stand and whether your current account structure still makes sense under the new figures.
A married couple with $2 million in registered and non-registered savings can lose $11,200 in Guaranteed Income Supplement (GIS) benefits each year by putting their bonds in the wrong account. That number comes from a published piece I wrote in early 2025 using the clawback threshold that applied at the time. The threshold has since moved, and the location decision has moved with it.
The GIS clawback begins when your income crosses a specific dollar figure. In 2026, a couple where both receive full OAS has a combined income threshold of approximately $29,760. The GIS income thresholds vary by household situation. The shift matters because the GIS benefit phases out at 50 cents per dollar of income above the threshold, and the withdrawal rate compounds with provincial top marginal tax rates to create an effective tax rate above 70% in some brackets. When the threshold moves, the income you can take before hitting that wall moves with it.
Why the threshold dictates where you hold fixed income
Interest income from bonds, GICs, and bond funds held in non-registered accounts counts as income for GIS purposes. Registered Retirement Income Fund (RRIF) withdrawals count as well. Tax-Free Savings Account (TFSA) withdrawals do not. Canadian dividends receive a tax credit that reduces their effective contribution to the clawback, but interest counts at face value.
For a retiree couple with $2 million split between RRSPs and non-registered accounts, holding fixed-income assets in the TFSA and equities elsewhere is the default strategy. The TFSA shields the interest income from both tax and the GIS clawback. If you reverse it, bonds outside, equities inside, the interest shows up as income, reduces your GIS, and triggers tax at the top rate.
The 2026 threshold gives you an additional $1,869 of income room before the clawback begins. That room does not change the ranking of which account holds which asset. It changes how much income you can generate before you need to start managing the location decision carefully.
What changed in practice
A couple with $500,000 in fixed income earning 4% generates $20,000 in annual interest. If that income sits in a non-registered account and pushes total income to $100,000, depending on their household GIS situation, they may be subject to significant clawback. At the 50% GIS reduction rate, the benefit loss would depend on the actual threshold applicable to the couple's situation. The penalty depends on the couple's specific household GIS scenario and income composition.
The strategy was already to hold interest-generating assets in TFSAs and RRIFs where possible, and equities in non-registered accounts where capital gains and Canadian dividends receive preferential treatment. What has changed is the margin of safety. Couples close to their applicable GIS threshold may benefit from reviewing their account structure.
The wedge between years
If you are planning asset location for a client turning 65 in 2026, confirm the applicable GIS threshold based on their household marital and OAS status. If the couple turned 65 in 2025, they lived through a year under the lower threshold and need to know both numbers. Any income projection that runs across the 2025-2026 boundary has to account for the jump midway through.
The GIS is recalculated annually based on prior-year income. A couple whose prior-year income falls below their applicable GIS threshold qualifies for GIS in the following year. A couple whose current-year income falls below their applicable GIS threshold continues to qualify for GIS in the following year. When the threshold rises, the clawback does not apply retroactively to prior years, which means you have slightly more room going forward.
Asset location is one of the few levers that improves outcomes without requiring you to take more risk or accept less income. Threshold changes, when they occur, do not alter the fundamental asset location strategy. It changes how much income you can draw before the cost of holding them in the wrong place becomes material.
If you're close to the threshold or planning retirement income for 2026, contact me. We'll confirm where you stand and whether your current account structure still makes sense under the new figures.
Sources
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