For the July 2026 to June 2027 recovery-tax period, Old Age Security recovery starts at $93,454 of 2025 net world income. Canada.ca also lists an estimated $95,323 start threshold for the July 2027 to June 2028 period based on 2026 income. The planning question is practical: which income sources count on line 23600, and which withdrawals can be timed or sourced differently?
Short answer
OAS recovery tax is 15% of net income above the applicable threshold. For July 2026 to June 2027, the start threshold is $93,454 and the full recovery point is $152,062 for ages 65 to 74 or $157,923 for ages 75+. TFSA withdrawals do not count as taxable income, but CPP, pension income, RRIF withdrawals, taxable interest, rental income, and taxable capital gains can.
1. The 2026 math: which threshold applies?
The Old Age Security recovery tax is commonly called the OAS clawback. It is calculated from individual net world income, not household income. That distinction matters for couples, because pension splitting can reduce one spouse's line 23600 income even if the household's total income does not change.
There are two 2026-related numbers readers often mix up. The current July 2026 to June 2027 recovery period uses 2025 income and starts at $93,454. The next July 2027 to June 2028 period uses 2026 income; Canada.ca lists the start point as an estimated $95,323 until final indexation is available.
The Clawback Formula
[Net income - $93,454] x 0.15 = Annual repayment
Example for the July 2026 to June 2027 period: if your net income is $110,000, the recovery amount is about $2,481.90 before any other adjustments.
2. The RRSP and RRIF income-smoothing strategy
Many retirees stop thinking about RRSP strategy once full-time work ends. But the years before age 71 can still matter because future RRIF minimums are based on account value and age. A controlled RRSP drawdown in lower-income years may reduce future forced RRIF withdrawals that would otherwise push income above the OAS recovery threshold.
A new RRSP contribution can still help if you have contribution room and eligible earned income. More often, the planning lever is withdrawal order: how much to draw from RRSP/RRIF, how much to take from non-registered accounts, and when to use TFSA withdrawals for one-time spending. For the step-by-step withdrawal target, use the RRSP meltdown strategy hub.
Planning example:
Instead of taking a large RRIF withdrawal to fund a renovation, a retiree might combine a smaller RRIF withdrawal with TFSA savings. The same household spending can create less taxable income, which may reduce OAS recovery tax.
3. Spousal Pension Splitting: Leveling the Field
The recovery tax is based on individual income, not household income.
Couples with uneven incomes are the primary targets of the OAS cliff. If Spouse A earns $120,000 and Spouse B earns $40,000, Spouse A will lose a significant portion of their OAS.
- Use Form T1032 to split up to 50% of eligible pension income (RRIF, LIF, etc.).
- Compare both spouses' line 23600 income before filing.
- Use TFSA withdrawals for irregular expenses when that is consistent with the broader plan.
4. FAQs: Mastering the Threshold
Does the TFSA count toward the clawback?
No. TFSA withdrawals are invisible to the CRA for income tax purposes. This is why we call it the "TFSA Reservoir." If you need an extra $20,000 for a kitchen renovation, take it from your TFSA rather than your RRIF to keep your income below the $95k cliff.
What happens at age 71?
At age 71, you must close your RRSP, often by converting it to a RRIF. Required RRIF withdrawals can add taxable income in later years. Some retirees take controlled RRSP withdrawals between ages 65 and 70 to reduce the future RRIF balance, but the right pace depends on tax brackets, benefits, spouse income, and cash needs.
The 2026 Audit Checklist
- 1. Estimate your total income (Line 23600) before December 31st.
- 2. Check your RRSP contribution room portal on CRA My Account.
- 3. Coordinate with your spouse on pension-splitting proportions for the Q1 filing.
Official source and next reads
SimRetire Editorial Team
Independent retirement education publisher
SimRetire publishes general Canadian retirement education using dated government sources, stated assumptions, and worked examples. We are not a financial-planning, accounting, legal, tax, or medical practice, and our material is not a substitute for personal professional advice.