The recovery tax applies only above the annual threshold.
CRA starts with net income before certain adjustments and uses the calculation in the federal tax worksheet. If the result is above the threshold for that income year, the recovery tax is generally 15% of the excess. It cannot be more than the OAS subject to repayment.
For the 2025 income year, the threshold was $93,454. Thresholds are indexed and the maximum-income points can change with OAS payment amounts, so use the current federal table rather than carrying an old figure into a new plan.
A Government of Canada example
If 2025 income were $100,000
| 2025 net income used in the example | $100,000.00 |
|---|---|
| Less the 2025 threshold | − $93,454.00 |
| Income above the threshold | $6,546.00 |
| Recovery tax at 15% | $981.90 |
The federal example says $981.90 would be repaid for the July 2026 to June 2027 recovery period. This is the recovery-tax calculation only. Regular federal and provincial income tax can also apply to OAS and the other income.
Dated example—not a personal tax calculation. The official page describes this calculation as a reference example, and the applicable tax worksheet determines the actual repayment.Income first, monthly deductions later
The income year and recovery period are different.
Income reported for one calendar year is used to estimate deductions from a later year of OAS payments. That timing can make a reduction feel unexpected.
The tax return reconciles the actual recovery amount. If the current year’s income is expected to be substantially lower, CRA provides a process to request reduced recovery withholding at source.
Four things that can affect OAS recovery
Your combined annual income
Employment, CPP, pensions, taxable investment income and registered withdrawals can add together in the income calculation.
A one-time taxable event
A large RRSP withdrawal, realized capital gain or other unusual income can create a higher-income year even when regular income is lower.
Where cash comes from
A normal TFSA withdrawal is generally tax-free and does not enter net income, while an RRSP or RRIF withdrawal is generally taxable. Account rules and circumstances still need to be confirmed.
Timing across several years
Reducing income in one year can affect tax, required future withdrawals, spending and estate values in other years. OAS recovery should not be considered in isolation.
Two tax effects
Regular income tax and the recovery tax are separate.
OAS is taxable income and may be taxed at the person’s combined federal and provincial marginal rate. When the applicable income calculation is also above the OAS threshold, the 15% recovery tax can apply in addition.
See an example of how the two tax effects can overlap. It illustrates the mechanics, not a choice of OAS date or withdrawal strategy.
Related questions
A few useful follow-ups.
Is the OAS threshold the same every year?
No. It is indexed. Use the federal table for the income year being reviewed.
Can the recovery tax exceed the OAS received?
No. The recovery calculation is capped by the OAS subject to repayment.
Why might monthly OAS be reduced later?
Income from an earlier calendar year is used to estimate recovery deductions for a later July-to-June payment period. The tax return reconciles the actual amount.
What if my income has fallen?
CRA says someone whose current net income is expected to be substantially lower may request reduced recovery withholding at source using Form T1213(OAS). Eligibility and processing should be confirmed directly with CRA.
Explore it in your plan
Review possible OAS recovery tax in your plan.
Retired Kevin can flag a possible exposure using the income assumptions entered. The result is a directional educational estimate—not a tax return—and does not determine a withdrawal strategy.
Official sources
These sources were reviewed July 29, 2026. Program rules and tax treatment can change; confirm the information that applies when acting.
- Service Canada: OAS pension recovery tax (opens in a new tab)
- CRA: Line 23500 social benefits repayment (opens in a new tab)
- CRA: Request to reduce OAS recovery tax at source (opens in a new tab)
Retired Kevin is not affiliated with or endorsed by these organizations.