OAS recovery tax

How the repayment works

The CRA compares your income, adjusted as the return’s worksheet requires, with the threshold for the year. For 2025 income the threshold is $93,454, and the CRA lists $95,323 for 2026 income (an estimate until the final figure is published). You repay 15% of the amount above the threshold, and the repayment can never exceed the OAS you actually received. The page that lists the thresholds shows income of roughly $152,000 or more for 2025 (for people aged 65 to 74) as the point where the whole pension is repaid.

The repayment is worked out on a federal worksheet and entered as social benefits repayment on line 42200, which increases the tax you owe, with a matching deduction on line 23500 so the repaid OAS is not taxed twice. Amounts already withheld during the year appear in box 22 of your T4A(OAS) slip, and you claim them on line 43700 as income tax deducted rather than as a deduction.

An illustrative example

Suppose someone received OAS in 2025 and their adjusted income was $103,454, which is $10,000 above the $93,454 threshold. Fifteen per cent of $10,000 is $1,500, so $1,500 of their OAS is recovered. Someone $50,000 above the threshold would be asked to repay $7,500, unless that exceeds the OAS they received, in which case the repayment stops at the amount received. The figures are illustrative only.

Income in this range can feel taxed twice: it is taxed at your ordinary marginal rate and also raises the 15% repayment. That is why a pension withdrawal, a large capital gain or an RRIF payment can cost more than the tax rate alone suggests.

How it is collected, and how to ask for less

Service Canada generally withholds the recovery tax from monthly OAS payments from July to June, based on the previous year’s income. If your net income was above the threshold but your income this year is expected to be substantially lower, you can ask the CRA for a waiver of the withholding by sending Form T1213(OAS) in writing. This only changes how much is withheld during the year; the final amount is settled on your return.

If your income falls after retirement or a one-time gain, expect the withholding to lag. A large withholding based on last year’s income may be larger than the repayment you end up owing.

What to discuss with your accountant

Bring your T4A(OAS), T4A(P), RRIF and pension slips, last year’s notice of assessment and a list of any planned sales or withdrawals. Ask whether splitting eligible pension income, timing a capital gain or adjusting an RRSP or RRIF withdrawal could keep income nearer the threshold, and whether a T1213(OAS) request is worth making. This entry describes the rule for residents of Canada; non-residents file a separate return.