The OAS Recovery Tax Still Takes 15 Cents Per Dollar, Here's What Actually Changed in 2026
A 71-year-old client walked into my office last month believing her Old Age Security was about to get cut in half because she'd converted her RRSP into a RRIF. She'd read something online about the OAS recovery tax, the so-called clawback, and assumed the whole benefit disappeared once income crossed a line. It doesn't work that way. It never has. What changed in 2026 wasn't the rate. It was the threshold, and that shift matters more for income planning than most pre-retirees realize.
The 15% rate is the same rate it's always been
The recovery tax takes back 15 cents for every dollar of net world income above the threshold. That figure hasn't budged. What moved was the line itself: the threshold jumped from $93,454 for 2025 income to $95,323 for 2026 income, according to ClearWealth Accounting Advisors. The rate stayed flat. The room to earn before the clawback kicks in expanded by $1,869, which translates to about $280 more in annual withdrawals before you start losing benefits.
That $1,869 matters most to people sitting just below the old threshold who were already throttling RRIF withdrawals to stay clear. If you modeled your 2025 drawdown at $93,000 to leave buffer, you now have nearly two thousand dollars more room in 2026 without triggering any recovery. For a couple with two RRIFs, that's close to $3,700 in additional household withdrawal capacity before either one of you loses a dollar of OAS.
The arithmetic still punishes lumpy income
The clawback works on net world income for the year, which includes RRIF withdrawals, employment earnings, rental income, dividends and capital gains at their taxable portion. One large withdrawal, say, pulling $40,000 extra from your RRIF in March to renovate the kitchen, can push you $15,000 over threshold for that year and cost you $2,250 in lost OAS for the following payment period. The recovery tax applies to the full year's income, so a withdrawal in December counts the same as one in January. Keep your annual total under $95,323 if you want to preserve the full benefit.
The recovery tax phases out your OAS completely once income reaches roughly $155,000, though the exact figure depends on the maximum monthly benefit in effect that year. Most contractors and tradespeople I work with aren't in that bracket, but plenty are in the zone between $95,000 and $120,000 where partial clawback applies. In that range, every additional dollar of income costs you the marginal tax rate on that dollar plus the 15-cent OAS recovery. If you're in a 30% marginal bracket provincially and federally combined, that same dollar is really costing you 45 cents when you factor in the clawback.
What you should model differently now
Start by running your projected 2026 income against the new $95,323 threshold. If you were planning RRIF withdrawals assuming the old $93,454 figure, you're leaving money on the table. The minimum RRIF withdrawal is mandatory, you can't skip it, but anything above the minimum is discretionary, and that's where the threshold change gives you room to adjust.
For couples, income splitting through pension income splitting rules can keep both partners under threshold instead of one partner crossing it. If one spouse has $110,000 in RRIF income and the other has $60,000, splitting moves $25,000 from the higher earner to the lower one, potentially keeping both under $95,323 and preserving OAS for both. The math is case-specific, but the principle holds: the new threshold makes splitting even more effective because the target zone is wider.
The recovery tax rate didn't change. The income bands did. Model against $95,323 for 2026, and if you're within $5,000 of that line, it's worth sitting down with someone who can map your withdrawal options across the next three to five years. The threshold will index again for 2027, but planning now against the current figure keeps more OAS in your pocket instead of sending it back to CRA.
A 71-year-old client walked into my office last month believing her Old Age Security was about to get cut in half because she'd converted her RRSP into a RRIF. She'd read something online about the OAS recovery tax, the so-called clawback, and assumed the whole benefit disappeared once income crossed a line. It doesn't work that way. It never has. What changed in 2026 wasn't the rate. It was the threshold, and that shift matters more for income planning than most pre-retirees realize.
The 15% rate is the same rate it's always been
The recovery tax takes back 15 cents for every dollar of net world income above the threshold. That figure hasn't budged. What moved was the line itself: the threshold jumped from $93,454 for 2025 income to $95,323 for 2026 income, according to ClearWealth Accounting Advisors. The rate stayed flat. The room to earn before the clawback kicks in expanded by $1,869, which translates to about $280 more in annual withdrawals before you start losing benefits.
That $1,869 matters most to people sitting just below the old threshold who were already throttling RRIF withdrawals to stay clear. If you modeled your 2025 drawdown at $93,000 to leave buffer, you now have nearly two thousand dollars more room in 2026 without triggering any recovery. For a couple with two RRIFs, that's close to $3,700 in additional household withdrawal capacity before either one of you loses a dollar of OAS.
The arithmetic still punishes lumpy income
The clawback works on net world income for the year, which includes RRIF withdrawals, employment earnings, rental income, dividends and capital gains at their taxable portion. One large withdrawal, say, pulling $40,000 extra from your RRIF in March to renovate the kitchen, can push you $15,000 over threshold for that year and cost you $2,250 in lost OAS for the following payment period. The recovery tax applies to the full year's income, so a withdrawal in December counts the same as one in January. Keep your annual total under $95,323 if you want to preserve the full benefit.
The recovery tax phases out your OAS completely once income reaches roughly $155,000, though the exact figure depends on the maximum monthly benefit in effect that year. Most contractors and tradespeople I work with aren't in that bracket, but plenty are in the zone between $95,000 and $120,000 where partial clawback applies. In that range, every additional dollar of income costs you the marginal tax rate on that dollar plus the 15-cent OAS recovery. If you're in a 30% marginal bracket provincially and federally combined, that same dollar is really costing you 45 cents when you factor in the clawback.
What you should model differently now
Start by running your projected 2026 income against the new $95,323 threshold. If you were planning RRIF withdrawals assuming the old $93,454 figure, you're leaving money on the table. The minimum RRIF withdrawal is mandatory, you can't skip it, but anything above the minimum is discretionary, and that's where the threshold change gives you room to adjust.
For couples, income splitting through pension income splitting rules can keep both partners under threshold instead of one partner crossing it. If one spouse has $110,000 in RRIF income and the other has $60,000, splitting moves $25,000 from the higher earner to the lower one, potentially keeping both under $95,323 and preserving OAS for both. The math is case-specific, but the principle holds: the new threshold makes splitting even more effective because the target zone is wider.
The recovery tax rate didn't change. The income bands did. Model against $95,323 for 2026, and if you're within $5,000 of that line, it's worth sitting down with someone who can map your withdrawal options across the next three to five years. The threshold will index again for 2027, but planning now against the current figure keeps more OAS in your pocket instead of sending it back to CRA.
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