Reducing or avoiding the Old Age Security (OAS) clawback comes down to managing the income used in the recovery-tax calculation. Some deductions can lower that income, while decisions about when to realize taxable income can prevent a single year from becoming unusually high. The right approach depends on where your retirement income comes from. For context, the 2026 OAS recovery threshold is $95,323, based on 2026 income and used for the July 2027 to June 2028 recovery period. We explain the underlying calculation separately in how the OAS clawback works.
Use Available RRSP Deductions
A deductible contribution to a Registered Retirement Savings Plan (RRSP) can reduce net income because the RRSP deduction is claimed at line 20800, before net income is calculated at line 23600. Someone close to the recovery threshold may therefore reduce or eliminate an OAS repayment by claiming an available RRSP deduction.
This option is mainly relevant while you can still contribute to an RRSP and have sufficient deduction room. It also needs more thought than simply maximizing the deduction. Money eventually withdrawn from an RRSP or Registered Retirement Income Fund (RRIF) is generally taxable, so a deduction that helps in one year can shift taxable income into a later year. We would look at the longer tax picture rather than treating an OAS saving by itself as proof that a contribution makes sense.
Split Eligible Pension Income With Your Spouse
Eligible couples can jointly elect to allocate up to 50% of qualifying pension income to a spouse or common-law partner. Pension income splitting reduces the transferring spouse’s net income and increases the receiving spouse’s net income. Because the OAS recovery calculation is based on the individual recipient’s income, that shift can reduce the transferring spouse’s OAS repayment.
Not every type of retirement income qualifies for pension splitting, and the receiving spouse’s tax situation matters too. The election is made using Form T1032 with the tax returns for the applicable year. Our separate article on income splitting and the OAS clawback covers that strategy in detail.
Use a TFSA for Savings That Do Not Need to Produce Taxable Income
A Tax-Free Savings Account (TFSA) can be especially useful around the OAS recovery threshold because TFSA investment income and withdrawals do not affect federal income-tested benefits. Interest, dividends and investment growth inside the account therefore do not increase the income used to determine an OAS clawback.
The contrast with a non-registered account matters. Taxable interest and other reportable investment income outside a TFSA can contribute to net income. Using available TFSA room for suitable savings and investments can prevent future investment returns from adding to the recovery-tax calculation.
Watch Large Taxable Income Events
An unusually high-income year can create an OAS clawback even when your normal retirement income sits below the threshold. A large RRSP or RRIF withdrawal, for example, generally becomes taxable income. Taxable capital gains can also enter income through line 12700.
Where you have legitimate control over timing, checking the tax consequences before realizing a large amount can be worthwhile. The goal is not to hide or omit income. It is to avoid accidentally concentrating discretionary taxable income in one calendar year without considering the OAS consequence.
Tax credits should not be confused with deductions for this purpose. For example, charitable donations generally produce a non-refundable tax credit rather than reducing the net income figure used for the recovery calculation. A strategy can reduce income tax without necessarily reducing an OAS clawback.
Check Which Deductions Actually Reduce Net Income
RRSP deductions are only one possibility. The 2025 federal return includes other deductions before line 23600, including eligible registered pension plan contributions, First Home Savings Account deductions, certain carrying charges and interest expenses, eligible employment expenses, and some support payments.
Whether any particular deduction applies depends on your circumstances. The useful test is where the amount enters the tax return. A legitimate deduction included in the calculation of net income may affect the recovery calculation, while a credit applied later in the return generally will not.
Questions About Reducing the OAS Clawback
Can capital losses help reduce an OAS clawback?
Allowable capital losses from the current year can offset taxable capital gains when Schedule 3 is completed. A net capital loss from another year has different tax treatment, so its effect should be checked against the specific recovery-tax calculation rather than assuming every capital-loss claim reduces OAS recovery.
Can you ask for lower OAS recovery deductions if your income suddenly falls?
Yes. If your previous year’s income triggered recovery tax but your current-year net income is expected to be substantially lower, you can submit Form T1213(OAS) to request a reduction in the recovery tax withheld at source. This changes the withholding based on the lower expected income rather than retroactively changing the previous year’s income.
Does contributing to a TFSA reduce your taxable income?
No. TFSA contributions are not deductible. Its OAS advantage comes from what happens afterward: qualifying investment income earned inside the account and withdrawals do not enter your taxable income.
Can you reduce the clawback by making a larger charitable donation?
A regular cash donation generally cannot lower the income figure used for the OAS recovery calculation because the donation normally generates a tax credit rather than a net-income deduction. Different tax considerations can apply when donating certain capital property, so that situation should be assessed separately.
