How Gordon Mackie Earned $97,200 in 2025 and Lost $642 to OAS Clawback — A Calgary Engineer’s Wake-Up Call

Gordon Mackie was standing at a honey vendor’s stall in the ByWard Market on a cool Saturday morning, turning a jar of buckwheat honey over in his hands and squinting at the label, when I introduced myself. He is 72, trim, with the unhurried manner of a man who spent four decades solving engineering problems in Calgary and now has nowhere particular to be. He set the jar down, shook my hand, and said the thing that had been nagging at him since April.

“I did everything right,” Gordon told me. “Good RRIF management, a bit of rental income, CPP, OAS — and then I got a letter from the CRA telling me I owed $642 back. I didn’t even know the clawback threshold existed.” That threshold — $93,454 of net world income in 2025 — is the number that quietly erases a portion of the Old Age Security cheque for hundreds of thousands of Canadians every year. Gordon’s experience is a textbook illustration of how it works, and why it catches so many retirees off guard.

The OAS Recovery Tax: What Most Articles Don’t Tell You

What most articles don’t tell you is that the OAS clawback is not calculated on your gross or taxable income in the conventional sense — it is calculated on your net world income, reported on Line 23400 of your T1 return, which feeds into Line 23500 where the recovery tax is actually assessed. That distinction matters enormously. RRIF minimum withdrawals, rental income, capital gains at 50% inclusion, and even foreign pension income all flow into that figure. You can have a modest lifestyle and still cross the line.

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For every dollar of net income above $93,454, the CRA recovers 15 cents from your OAS pension — and your 2025 income determines what you receive from July 2026 to June 2027.

— Gordon

The mechanics are straightforward once you see them. For every dollar of net income above $93,454, the CRA recovers 15 cents from your OAS pension. The government calls it a “recovery tax,” not a clawback, but the effect is identical: your monthly OAS cheque shrinks, or you repay the difference when you file. Canada.ca’s official OAS recovery tax page^[1] explains that the reduction is applied from July of the following year through June — meaning your 2025 income determines what you receive from July 2026 to June 2027.

“Part or your entire OAS pension is reduced as a monthly recovery tax. You must pay the recovery tax if your annual net world income is more than $90,997 (for the July 2025 to June 2026 payment period).”

— Old Age Security pension recovery tax, Canada.ca

Note the two thresholds in play: the $90,997 figure governs the current payment period (July 2025–June 2026), while the $93,454 threshold applies to 2025 net income and determines the repayment assessed on your 2025 T1 return — the one Gordon filed in April 2026. These are indexed separately and often quoted interchangeably, which causes enormous confusion.

Gordon’s Numbers: How $97,200 Produced a $642 Bill

Gordon’s 2025 income came from four sources: his CPP retirement benefit, OAS, RRIF minimum withdrawals, and a small amount of rental income from a suite in his Calgary home. None of these streams felt extravagant to him. Together, they added up to $97,200 of net world income.

The math on Line 23500 is simple. Gordon’s income exceeded the $93,454 threshold by $3,746. Multiply that by 15 cents and you get $561.90 — close to, but not exactly, the $642 he owed. The gap, he explained, came from a partial-year OAS adjustment and a small amount of interest income he had initially overlooked. Once his accountant reconciled everything, the final recovery tax landed at $642.

“It’s not a fortune,” Gordon said, leaning against the market railing with his canvas bag of vegetables, “but it’s the principle. I could have managed my RRIF withdrawal differently and stayed under the line. Nobody told me the threshold existed until it was too late for 2025.”

For context: the maximum OAS pension for Canadians aged 65 to 74 in 2026 is approximately $727 per month, indexed quarterly. At 75, an automatic 10% boost brings that to roughly $800 per month. Gordon, at 72, receives the lower rate. A full clawback — losing every dollar of OAS — would require net income of approximately $151,668 for someone in the 65-to-74 age band. Gordon was nowhere near that, but even a partial clawback stings when you have budgeted around a fixed monthly cheque.

A Canada reader on r/PersonalFinanceCanada recently asked a nearly identical question: “My RRIF withdrawal pushed me $4,000 over the OAS threshold — is there any way to fix this after the fact?” The short answer the community gave was: not retroactively, but you can adjust your RRIF strategy, use pension income splitting, or shelter future income in a TFSA before next year’s income crystallises.

What Gordon Did — And When He Did It

After filing his 2025 T1 return on 28 April 2026 and paying the $642 recovery tax, Gordon booked a session with a fee-only retirement planner in Calgary to map out his income for 2026 and beyond. The planner walked him through three levers he had not fully considered.

First, pension income splitting. Gordon’s spouse, Diane, is 68 and has a lower net income. Under CRA Form T1032^[2], up to 50% of eligible pension income — including RRIF withdrawals — can be allocated to a lower-income spouse. Shifting a portion of his RRIF income to Diane’s return could reduce Gordon’s net income on Line 23400 by enough to stay beneath the $93,454 threshold in future years.

Second, TFSA sheltering. Gordon had not fully used his TFSA room. The 2026 annual contribution limit is $7,000, and cumulative room for someone who has been eligible since 2009 is now approximately $102,000. By moving non-registered GIC interest income into a TFSA, the interest no longer appears on his T1 at all — it is invisible to the OAS recovery tax calculation. In late May 2026, Gordon transferred $18,000 from a non-registered savings account into his TFSA, using room he had accumulated but never filled.

Third, RRIF withdrawal timing. At age 72, Gordon’s mandatory RRIF minimum withdrawal factor is 5.40% of his opening RRIF balance. He cannot avoid that minimum, but he can avoid taking more than the minimum, which he had been doing to fund a kitchen renovation. His planner recommended he draw the renovation funds from his TFSA instead, keeping his RRIF withdrawal at exactly the 5.40% minimum for 2026.

“Hindsight is a wonderful thing,” Gordon said with a dry laugh. “If I had run these numbers in January instead of finding out in April, I would have made different choices. The CRA doesn’t send you a warning letter mid-year.”

What the 2026 Numbers Mean for You

The OAS recovery tax threshold is indexed to inflation each year. For the 2025 tax year — the return most readers filed or are filing now — the threshold is $93,454. The 2026 threshold (which will affect your 2026 T1 filed in spring 2027) has not yet been officially confirmed by Service Canada, but based on indexation trends it is expected to rise modestly. The clawback rate stays fixed at 15 cents per dollar regardless of age or province.

The commonly overlooked detail is that provincial income — including Alberta’s provincial tax — does not change the federal OAS recovery tax formula. The recovery tax is a federal mechanism only, assessed on your federal T1 regardless of whether you live in Alberta, Ontario, Québec, or British Columbia. However, provinces do not offer a corresponding credit, so the effective marginal rate for someone near the threshold can spike sharply once you layer provincial tax on top.

Service Canada^[3] administers OAS payments and will automatically adjust your monthly cheque downward starting July 2026 if your 2025 income exceeded the threshold — you do not need to request this. If you prefer to avoid a lump-sum repayment at tax time, you can ask Service Canada to begin withholding the recovery tax from your monthly OAS payment immediately. Many retirees Gordon spoke with at his Calgary seniors’ centre did not know this option existed.

For RRIF holders specifically, the CRA’s RRIF guidance^[4] confirms that only amounts above the annual minimum are subject to withholding tax (10% on amounts under $5,000 above the minimum; 20% on $5,000–$15,000; 30% above $15,000). The minimum itself is paid without withholding — but it still counts toward your net income and therefore toward the OAS clawback threshold.

What You Can Do Today

Gordon’s story is not unusual. It plays out every spring across Alberta, Ontario, British Columbia, and every other province where retirees draw CPP, OAS, and RRIF income simultaneously without a clear picture of how those streams interact on a single tax line.

The practical takeaways are these: know your net world income figure before December 31 of each year, not after. Use pension income splitting via Form T1032 if your spouse has lower income. Fill your TFSA room — $7,000 per year in 2026, with up to $102,000 of cumulative room available — so that investment returns stay off your T1 entirely. And if you are over 71 and drawing RRIF minimums, resist the temptation to take more than the mandatory amount unless you have modelled the OAS impact first.

Gordon left the ByWard Market that Saturday with his buckwheat honey and a bundle of Quebec radishes. He seemed less bothered by the $642 than by the feeling that the rule had been hiding in plain sight. “It’s all on the CRA website,” he admitted. “I just never thought to look until it cost me money.” That, perhaps, is the most Canadian retirement lesson of all: the rules are public, the thresholds are published, and the cost of not reading them shows up on Line 23500.