OAS Clawback Thresholds for 2026: Planning With the $95,323 Entry Line

Picture a couple in their early sixties living in Charlottetown, a composite of a pattern I see often rather than any one household. He spent three decades in a salaried role with a workplace pension. She worked part time and then stepped back to care for a parent. They still carried a mortgage, which is less unusual as it sounds. Statistics Canada data has shown mortgage balances for Canadians aged 55 to 64 growing about 6% year over year.

Their plan was simple and, on paper, sensible. He would retire at 63. They would live on savings for two years, start Old Age Security and CPP at 65, and deal with the tax details once the paycheques stopped and the picture was clearer. Waiting for clarity is a reasonable instinct. Most people would do the same.

What the line actually is

OAS is not lost all at once. Once net income passes a starting threshold, the government recovers a portion of each dollar above it through what Service Canada calls the recovery tax. For 2026 income, that starting line sits at $95,323. Keep going and you eventually reach the point where the benefit is gone entirely.

That upper line is the one that moved. The full clawback point, which differs for ages 65 to 74 and for those 75 and older, is indexed and shifts by a modest amount each year. Nobody restructures a retirement over that.

The couple certainly didn't. The amount was never the problem. The calendar was.

The two years that mattered

His last working year came and went with income well above both of hers combined. Then came the gap: two years at 63 and 64 with no salary, no OAS, no CPP. His taxable income dropped close to the floor. Those were the years when drawing down part of his RRSP would have been taxed at low rates, shrinking the balance that would later turn into required RRIF withdrawals stacked on top of his pension, CPP and OAS.

They lived on savings instead. It felt prudent, since it left the registered money untouched and growing.

The mortgage was the second deferred decision. They had talked about restructuring it, maybe setting up a line of credit and reorganizing the debt so it worked with their investments rather than against them. But a lender qualifies you on income you can document. Under OSFI's rules, uninsured borrowers have to pass a stress test at the higher of their contract rate plus 75 basis points, or 5.25%. A salaried 62-year-old clears that test far more easily than a retiree living on savings whose pension hasn't started. By the time they asked, the conversation had changed.

Where it landed

The turning point was not dramatic. It was his first full tax return at 65. Pension, CPP, OAS and a larger RRSP withdrawal, needed partly to keep up with mortgage payments, pushed his net income past $95,323. Some of his OAS came back to the government. It would happen again the next year and the year after, because the larger registered balance they had protected would keep producing taxable income for the rest of his life.

Her income was still low. Some of that imbalance could have been smoothed earlier: with spousal RRSP contributions while he was working, with deliberate withdrawals in the gap years, or with a debt structure set up while his salary still qualified. Pension income splitting helped once they used it. It could not undo the years already spent.

None of their choices was reckless. Each one looked defensible in the year it was made. The $45 shift in the upper threshold barely registered. What mattered was that the low-income years and the borrowing years were each available once, and they passed while the couple was waiting for a clearer picture.

They now sit down every October, before the tax year closes, and run the next three years forward: projected income for each spouse, where it falls against the line, and what the mortgage is costing them in withdrawals. Their neighbours, both 58 and both still working, have started doing the same.