Old Age Security payments rose again on October 1. For Canadians who have already moved south, the more useful question is not how much the cheque went up — it is whether the OAS clawback applies to a non-resident at all. The answer turns on one paragraph of the Canada–US tax treaty rather than on the Canadian rules most retirees have spent decades reading about.
For the October-to-December 2026 quarter, the maximum monthly OAS pension is $762.50 for recipients aged 65 to 74 and $838.75 for those 75 and over. Service Canada puts the quarterly increase at 1.4%, and 3.0% over the year from October 2025 to October 2026. Those are Canadian dollars, which matters more than usual right now: the Bank of Canada’s daily rate was 1.4271 Canadian per US dollar on October 9, up from 1.3866 on September 11, so the same OAS payment buys noticeably fewer US dollars than it did a month ago.
How does the OAS clawback actually work?
The clawback is formally the OAS recovery tax. When net world income exceeds an indexed threshold — $93,454 for 2025, in Canadian dollars — 15 cents of OAS is recovered for every dollar of income above that line. Service Canada’s own illustration: 2025 income of $100,000 exceeds the threshold by $6,546, and 15% of that is $981.90, recovered over the July 2026 to June 2027 payment period. Service Canada estimates the threshold at $95,323 for 2026 income.
Keep going up the income scale and the recovery becomes total. Based on 2025 income, the full pension is recovered once net world income reaches roughly $152,062 for recipients aged 65 to 74 and $157,923 for those 75 and over. Two features catch cross-border retirees out. First, the measure is net world income — not Canadian-source income — so a US pension, an IRA withdrawal or a US rental property counts. Second, the recovery is applied prospectively against the following July-to-June payment period rather than as a lump-sum bill, so a single high-income year quietly shrinks twelve months of future payments.
Does the OAS clawback apply to a non-resident?
This is where the OAS clawback non-resident rules stop tracking the domestic ones. Service Canada states that a non-resident pays the recovery tax only if two conditions are both met: net world income is above the threshold, and the recipient lives in “a country where the non-resident tax on Canadian pensions is 25% or more.” Where the non-resident tax is below 25%, Service Canada says you do not need to file the Old Age Security Return of Income, and the total of non-resident tax plus recovery tax can never exceed the OAS actually received.
That 25% test is the hinge. Canada’s default Part XIII withholding on pension payments to non-residents is 25%, which is why the condition is written the way it is — but tax treaties reduce it, and the Canada–US convention goes further than most for social security.
The core idea: For a Canadian retiree living in Arizona, the operative question is generally not “is my income above $93,454?” It is “what does the treaty say about my OAS?” — because that decides whether the non-resident recovery tax is reached at all.
What does the Canada–US treaty do to OAS?
Article XVIII(5) of the Canada–United States tax convention provides that social security benefits paid to a resident of the other country “shall be taxable only in that other State.” Paragraph (b) adds that a Canadian benefit paid to a US resident “shall be taxable in the United States as though it were a benefit under the Social Security Act.” In plain terms, the treaty hands taxation of Canadian social security — OAS and CPP among them — to the United States when the recipient is a US resident.
For a recipient who is a US resident for treaty purposes, the practical consequences are generally:
- No Canadian tax on OAS, rather than the 25% domestic default.
- The 25% non-resident test in the recovery-tax rule is not met, so the OAS clawback does not apply and the OAS Return of Income is not required.
- The income is taxed in the United States instead, under the ordinary US social security rules.
On the US side, IRS Publication 915 confirms the treatment: social security benefits paid by Canada to US residents are treated for US income tax purposes as if they were paid under US social security law. So the familiar US thresholds apply — up to 50% of benefits taxable above a base amount of $25,000 (single) or $32,000 (married filing jointly), rising to up to 85% once combined income exceeds $34,000 or $44,000.
None of this is automatic. Residency for treaty purposes is a factual question, the treaty treats periodic pensions such as RRSP and RRIF withdrawals under a different paragraph with a different rate, and Service Canada does not apply the treaty position unless it knows you have moved. The pattern above is the common one, not a guarantee.
Where does this go wrong in practice?
- Residency is assumed rather than established. Someone who still files as a Canadian resident does not get the non-resident analysis — they get the ordinary clawback, measured against worldwide income that now includes US sources.
- Service Canada is never told about the move. Benefit administration, withholding and the Return of Income requirement all key off the address and residency status on file.
- OAS is treated in isolation. The same move changes how CPP, RRSP and RRIF withdrawals and US Social Security are taxed, and those interact. Our note on coordinating CPP, OAS and Social Security covers that overlap.
- Currency is ignored in the plan. OAS is indexed to Canadian prices and paid in Canadian dollars; if it funds US spending, the exchange rate does as much work as the indexation.
What this means for cross-border clients
October’s increase is a reasonable prompt to check three things rather than one. Confirm your residency position for treaty purposes, and that Service Canada and the CRA both reflect it. Confirm what is actually being withheld on each Canadian retirement income stream, since OAS, CPP and RRIF withdrawals are not all treated alike. Then look at your whole income picture on the US side — a Roth conversion, a property sale or an unusually large RRIF withdrawal changes how much of your OAS the IRS taxes, even where the Canadian clawback no longer reaches you. The OAS clawback non-resident rules are generally far more forgiving for a US-resident retiree than the domestic rules, but only when the residency and withholding positions are set up correctly and documented.
Frequently asked questions
How much is OAS in October 2026?
For the October-to-December 2026 quarter, the maximum monthly OAS pension is $762.50 for recipients aged 65 to 74 and $838.75 for recipients 75 and over. Service Canada reports the quarterly increase as 1.4%, and 3.0% over the year from October 2025 to October 2026.
What is the OAS clawback threshold?
The recovery tax applies once net world income exceeds an indexed threshold, which is $93,454 for 2025 income in Canadian dollars. Above it, 15 cents of OAS is recovered per dollar of excess income. Based on 2025 income, OAS is fully recovered at roughly $152,062 (ages 65 to 74) or $157,923 (75 and over).
Does the OAS clawback apply if you live in the United States?
Generally not. Service Canada applies the recovery tax to a non-resident only where the non-resident tax on Canadian pensions in their country of residence is 25% or more. The Canada–US treaty makes Canadian social security paid to a US resident taxable only in the United States, so a US resident for treaty purposes does not meet that test. Residency is fact-specific and worth confirming with a cross-border advisor.
Is Canadian OAS taxable in the United States?
Generally yes. Under Article XVIII(5) of the treaty, Canadian social security paid to a US resident is taxable in the United States as though it were a US Social Security Act benefit, and IRS Publication 915 confirms that treatment. The usual US rules then apply: up to 50% of benefits taxable, and up to 85% once combined income exceeds $34,000 (single) or $44,000 (married filing jointly).
Is your Canadian pension income being taxed twice?
We plan OAS, CPP, RRSP and US retirement income as one picture, under both tax systems — as one of the only firms registered as a Portfolio Manager in Canada and an RIA in the United States.
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Related reading: our cross-border retirement planning service, coordinating CPP, OAS & Social Security, the Canada–US Totalization Agreement, objecting to OAS enrolment in Canada, and the WEP repeal and what it meant for Canadians.
Sources
- Old Age Security payment amounts (October to December 2026) — Government of Canada / Service Canada — canada.ca
- Old Age Security: Recovery tax — Government of Canada / Service Canada — canada.ca
- Convention Between Canada and the United States of America With Respect to Taxes on Income and on Capital, Article XVIII(5) — Department of Finance Canada (consolidated) — canada.ca
- Publication 915, Social Security and Equivalent Railroad Retirement Benefits — Internal Revenue Service — irs.gov
- Daily exchange rates, USD/CAD (1.3866 on September 11, 2026; 1.4271 on October 9, 2026) — Bank of Canada — bankofcanada.ca
© 2026 Lucas Wennersten · 49th Parallel Wealth Management, LLC · From the Desert to the Tundra™. For educational purposes only. Not financial, tax, or legal advice. Tax treatment depends on your residency and individual circumstances, and treaty positions should be confirmed with a qualified cross-border tax advisor. Figures are as published by the named authorities on the dates shown.
