GIS Clawback: The Old Age Security Act Takes 75 Cents of Every Dollar in One Band of Income
The GIS clawback is not in a tax bracket. It is in the Old Age Security Act, and across one band of low income it takes 75 cents of every dollar of counted income, including a dollar drawn out of a RRIF. For an Ontario senior whose other income is pension, registered-plan or interest income, the whole of that band sits below the income at which a cent of income tax is due to either government. The Guaranteed Income Supplement is reduced by 50 cents for every dollar of counted income, meaning pension income, investment income and registered-plan withdrawals. A second rule in the same Act stacks another 25 cents on top of that over a band of low income, which is where the 75 comes from.
None of this is an approximation or a rule of thumb. It is the arithmetic the statute sets out, and the band the 75 cents reaches across is three and a half times wider than when Parliament wrote the rule in 2011, because the width of that band is a fixed multiple of a top-up amount that has more than tripled since.
The published maximums and cut-offs
Service Canada publishes the GIS maximum and the income cut-off every quarter. Data as of the October to December 2026 payment quarter, from Old Age Security payment amounts:
| Situation | Maximum monthly GIS | Income cut-off |
|---|---|---|
| Single, widowed or divorced | $1,138.90 | annual net income under $23,112 |
| Spouse receives full OAS | $685.56 each | combined income under $30,528 |
| Spouse receives neither OAS nor the Allowance | $1,138.90 | combined income under $55,392 |
| Spouse receives the Allowance | $685.56 | combined income under $42,768 |
The Allowance named in the last two rows is a separate benefit under subsection 19(1) of the same Act, which may be paid to the spouse, common-law partner or former common-law partner of a pensioner who has reached 60 but not 65.
The maximum monthly OAS pension for ages 65 to 74 is $762.50 in the same quarter, which is $9,150.00 a year. The cut-offs in that table are not a cliff. They are the point at which a reduction that began at the first dollar of counted income finishes its work.
The rate is written into the statute
Section 12 of the Old Age Security Act reduces the monthly supplement by “one dollar for each full two dollars of the pensioner’s monthly base income”. Subsection 12(5) writes that as a formula, [(A – B) x C] – D/2.
Each letter is defined in the subsection. A is the aggregate of the maximum supplement that “but for this subsection, might have been paid to the pensioner for that month” and “the amount of the full monthly pension”. B is “the pensioner’s monthly pension”. C is “the pensioner’s special qualifying factor for the month”, which section 2 fixes at one for anyone who is not a “specially qualified individual”, a term turning on residence in Canada of ten or more years after turning 18, so for most pensioners the term drops out. D is monthly base income “rounded, where it is not a multiple of two dollars, to the next lower multiple of two dollars”. The shape of the formula is a floor and a subtraction rather than an exemption: A builds the floor out of the full monthly pension plus the maximum supplement, B takes back the pension the pensioner is actually paid, and D/2 comes off what is left. For a pensioner receiving the full monthly pension, A minus B comes to the maximum supplement, and D/2 is the clawback taken off it.
Fifty cents of GIS per dollar of income, by statute.
What counts as income is defined in section 2: the person’s income computed under the Income Tax Act, with specific deductions. Two of them matter here. Paragraph 2(c)(i) deducts OAS benefits themselves, so neither the OAS pension nor the GIS counts against the GIS. Paragraph 2(b.1) exempts employment and self-employment earnings, specifically “the lesser of $5,000 and the combined amount” and then, above $5,000, “the lesser of $5,000 and half of the amount by which the combined amount exceeds $5,000”. The first $5,000 of earnings is exempt, the next $10,000 is half exempt, and a senior with $15,000 of earnings has $10,000 of it shielded.
There is no equivalent exemption for a RRIF or RRSP withdrawal.
For a couple, the test runs on one combined number
Subsection 12(6) sets whose income is counted. For a single pensioner it is one twelfth of their own income. For a pensioner whose spouse also receives OAS, paragraph 12(6)(c)(ii) uses “one twenty-fourth of the aggregate of the incomes of the applicant and the spouse or common-law partner”. Each spouse then loses 25 cents per dollar of the couple’s combined income, so the household still loses 50 cents in total.
That has a consequence for anything that moves income between two spouses rather than reducing it. CPP pension sharing moves retirement income from one partner to the other, which changes each person’s own figure. The aggregate the GIS is tested on comes out the same, so the GIS does too.
A second rule adds 25 cents above a threshold that has not moved since 2011
Section 12.1 adds a top-up on top of the section 12 supplement, computed as A x B – C/4. For a single pensioner, C is one twelfth of income “in excess of $2,000”, rounded down to a multiple of four dollars.
Work that through. Each extra dollar of annual income cuts the monthly top-up by one forty-eighth of a dollar, so it cuts the annual top-up by 12/48, which is 25 cents. Stacked on section 12’s 50 cents, a pensioner inside that band loses 75 cents of every dollar.
The $2,000 has never been indexed. Subsection 12.1(3) indexes A, the top-up amount, by CPI every quarter. It leaves untouched the $2,000 sitting inside C, which is the figure Parliament enacted in 2011, and the couple’s equivalent of $4,000 is frozen the same way. The nominal amounts the Act names for July 2011 are $50 in subsection 12.1(1), then within subsection 12.1(2) a further $50 in paragraph (a) of A, which covers the months before a pension can be paid to the spouse, and $35 in paragraph (b), which covers the months once it can. Subsection 12.1(2.1) added $78.92 in July 2016 to the $50 amount wherever it appears, in subsection (1) and in paragraph (a) of A in subsection (2), and left the $35 where it was. So A has risen on two counts, quarterly indexation and a deliberate act of Parliament. The income a senior can have before the top-up starts being taken away has not moved at all. The first $2,000 is the only slice of income the second rule never reaches, and it is the same number of dollars in 2026 that it was in 2011.
Splitting the published maximum, our arithmetic
Service Canada publishes one GIS maximum in that table. It is the sum of the section 12 base and the section 12.1 top-up, and that table does not publish the two parts separately. Deriving the split is our own arithmetic on the published maximum and the published cut-off.
The published cut-off is the point where the section 12 base reaches zero, the top-up having run out well before it. The base falls at 50 cents per dollar, so for a single pensioner the base maximum is $23,112 divided by 24, or $963.00 a month, leaving a top-up of $175.90. For a couple both receiving OAS it is $30,528 divided by 48, or $636.00 a month, leaving $49.56 each.
One check comes out of the indexation. Subsection 12(2) indexes both base amounts by the same CPI ratio every quarter, so the ratio between them should hold to within quarterly rounding to the cent: the January 2007 statutory amounts give 0.660628 and our derived amounts give 0.660436, agreeing to within 0.000192.
The second check is the one that settles it, because it runs on a published figure the derivation never touched. The $55,392 cut-off covers a pensioner whose spouse receives neither OAS nor the Allowance. Paragraph 12(6)(b) sets that person’s base income at A/24 – B/2, where B is the full monthly pension rounded up to a multiple of four dollars, so $762.50 becomes $764.00. Run our derived base of $963.00 through it and the base reaches zero at (2 x $963.00 + $382.00) x 24, which is $55,392. The published cut-off, to the dollar.
What a RRIF withdrawal actually costs
Here is a single pensioner aged 65 to 74, an Ontario resident on the full OAS pension, whose only other income is a RRIF withdrawal. The figures are our arithmetic using the Act’s own roundings, the two dollar rounding in subsection 12(5) and the four dollar rounding in section 12.1. At zero other income their GIS is $13,666.80 for the year.
Both rules measure all counted income together rather than the withdrawal on its own, so a pensioner already drawing a CPP retirement pension has spent that much of the band before the first dollar leaves the RRIF. Section 2 deducts CPP contributions and the CPP death benefit and never the retirement pension, so $9,000 of CPP leaves $1,448 of the 75% band: on those numbers the first $1,448 of a withdrawal costs 75 cents on the dollar and everything above it costs 50.
| RRIF withdrawal | GIS for the year | GIS lost | Kept of the withdrawal | Share lost |
|---|---|---|---|---|
| $0 | $13,666.80 | $0.00 | ||
| $1,000 | $13,174.80 | $492.00 | $508.00 | 49.2% |
| $2,000 | $12,670.80 | $996.00 | $1,004.00 | 49.8% |
| $3,000 | $11,926.80 | $1,740.00 | $1,260.00 | 58.0% |
| $5,000 | $10,426.80 | $3,240.00 | $1,760.00 | 64.8% |
| $8,000 | $8,170.80 | $5,496.00 | $2,504.00 | 68.7% |
| $10,000 | $6,682.80 | $6,984.00 | $3,016.00 | 69.8% |
| $15,000 | $4,056.00 | $9,610.80 | $5,389.20 | 64.1% |
| $20,000 | $1,560.00 | $12,106.80 | $7,893.20 | 60.5% |
| $23,112 | $0.00 | $13,666.80 | $9,445.20 | 59.1% |
The share in the right-hand column is the average across the whole withdrawal. The rate on the next dollar is the slope of GIS against income, and measured on these figures it is 0.7500 from $3,000 to $4,200 of income and 0.7500 again from $6,000 to $7,200, then 0.5000 from $15,000 to $16,200 and 0.5000 from $20,000 to $21,200.
The 75% band ends where the top-up runs out. C only takes values that are multiples of four dollars, so for a single pensioner the top-up survives until C reaches 704, which happens at $10,448.00 of income. For a couple both on OAS, C reaches 200 at $8,800.00 of combined income.
A couple both drawing OAS meet both rules on a single number. The combined-income test in paragraph 12(6)(c)(ii) means every dollar either of them brings in cuts each spouse’s own supplement by 25 cents and the household’s total by 50, whichever of the two the money came to. On our arithmetic their maximum of $685.56 each splits into a base of $636.00 a month and a top-up of $49.56. The threshold treats them no differently from two single people, because $4,000 of combined income is $2,000 each. What is smaller is A. Their top-up of $49.56 stands against a single pensioner’s $175.90, for two reasons: the $35 amount in paragraph (b) of A in subsection 12.1(2), the one that applies once both spouses are pensioners, was already smaller than the $50 amount before 2016, and it never received the $78.92 that went to the $50 amounts that year. A smaller top-up is a narrower band: their 75% band runs from $4,000 to $8,800.00 of combined income, a width of $2,400.00 per person against the single pensioner’s width of $8,448.00, or 28.4% of it.
The 75% band is three and a half times wider than it was in 2011
The band runs from the $2,000 threshold to the income that exhausts the top-up, and only one of those two ends is allowed to move. Our arithmetic on section 12.1 under its own four dollar rounding, using the amount the Act names for July 2011 and our derived amount for this quarter:
| Top-up A | 75% band | Width | |
|---|---|---|---|
| July 2011 | $50.00 | $2,000 to $4,400.00 | $2,400.00 |
| October to December 2026 | $175.90 | $2,000 to $10,448.00 | $8,448.00 |
The band is 3.52 times wider than it was, and A itself has risen by almost the same multiple, 3.518, from $50.00 to $175.90. For a single pensioner the band runs from the threshold to the threshold plus 48 times A, up to the four-dollar rounding of C that fixes the top edge, so its width tracks 48 times A rather than matching it exactly, which is why the two multiples come out as 3.52 and 3.518 rather than one number: had the $2,000 been indexed, the band today would be very nearly as wide and would simply sit higher up the income scale. Both forces behind the widening are in section 12.1: quarterly indexation of A, and the $78.92 Parliament added to it in 2016. What the frozen threshold does is different. It holds the protected slice at the bottom where it was, so a senior in 2026 shelters the same $2,000 from the 25-cent rule that a senior in 2011 did, with three and a half times as much income above it exposed.
The clawback arrives thousands of dollars before income tax does
The supplement does not tax itself, and the mechanism is worth seeing because it is two steps rather than an exemption. Clause 56(1)(a)(i)(A) of the Income Tax Act includes in income “the amount of any pension, supplement or spouse’s or common-law partner’s allowance under the Old Age Security Act”. Paragraph 110(1)(f) then deducts “any social assistance payment made on the basis of a means, needs or income test and included because of clause 56(1)(a)(i)(A)”. The GIS goes into net income and comes back out in computing taxable income, which leaves this pensioner’s taxable income as the OAS pension plus the RRIF withdrawal and nothing else.
Three levies in the tax system could reach that money: federal income tax, Ontario income tax and the Ontario health premium. Credits decide where the two income taxes start. The CRA’s 2026 personal tax credits returns put the federal basic personal amount at $16,452 and the federal age amount at $9,208 for anyone who “will be 65 or older on December 31, 2026” whose net income “will be $46,432 or less”, a ceiling this pensioner’s income never approaches. On the Ontario TD1ON the age amount is $6,342, and the Ontario basic personal amount of $12,989 comes from the CRA’s T4032ON payroll tables as of January 2026. These are entitlements rather than choices, so they all count here.
Ontario then applies a step that is easy to miss. The same payroll tables set out an Ontario tax reduction, with a basic personal amount of $300, and the rule is that “the reduction is equal to twice the individual’s personal amounts minus the provincial tax payable before reduction”, capped at the tax itself, and “nil when the provincial tax payable before reduction is more than twice the personal amounts”. The tax it is measured against is the basic Ontario tax, before the health premium, which is how the CRA’s own worked example runs it. Small Ontario tax bills are wiped out rather than reduced. The health premium has a floor of its own: “when taxable income is less than or equal to $20,000, the premium is $0”.
Set all of that against an OAS pension of $9,150.00, at the lowest bracket rates of 14% federally for 2026 and 5.05% in Ontario, both from those payroll tables, and each levy begins here, on our arithmetic:
| Levy | Starts above a withdrawal of |
|---|---|
| Ontario health premium | $10,850.00 |
| Ontario income tax, after the reduction | $16,121.59 |
| Federal income tax | $16,510.00 |
The 75% band runs from $2,000 to $10,448.00 of withdrawal. Not one of the three reaches into it. The earliest of them, the health premium, starts $402.00 above the top of the band.
So the finding is the whole band and not a corner of it. Across the full span from $2,000 to $10,448.00 of withdrawal, this senior loses 75 cents on the dollar and pays no federal income tax, no Ontario income tax and no Ontario health premium on any of it. The clawback is not stacked on top of tax. It arrives thousands of dollars before tax does. At a $3,000 withdrawal they keep $1,260, lose $1,740 of GIS, and owe nothing to either government.
The finding is more general than this one pensioner, because counted income inside the band is at most the top of the band. For any senior on the full pension for ages 65 to 74 whose other income is pension, registered-plan or interest income, taxable income while they are inside the band is at most $9,150.00 plus $10,448.00, which is $19,598.00. Federal credits of $25,660.00 clear that by $6,062.00. Ontario income tax becomes payable above $25,271.59 of taxable income, clear by $5,673.59. The health premium floor of $20,000.00 is the tightest of the three and clears by $402.00, a margin built on this quarter’s band top of $10,448.00. So the whole of the 75% band sits below all three levies for any Ontario senior aged 65 to 74 on the full pension whose other income is pension, registered-plan or interest income, not only for one whose other income happens to be a single RRIF withdrawal.
Past 75 the answer changes, because the pension is larger. The maximum monthly OAS pension for ages 75 and over is $838.75 in the same quarter, or $10,065.00 a year, so taxable income at the top of the band reaches $20,513.00, which is $513.00 over the health premium floor. The premium therefore reaches the top $513.00 of the band, meaning counted income from $9,935.00 to $10,448.00, at 6% of taxable income above $20,000. Across that slice the marginal rate is 75% plus 6%, or 81%. Federal and Ontario income tax still do not reach the band at that age either, clearing by $5,147.00 and $4,758.59.
The cost lands in a later payment period
None of that reaches the bank account the month the money comes out. Section 10 of the Act defines the “base calendar year” that its other provisions keep referring to as “the last calendar year ending before the current payment period”, and a payment period runs from July 1 of one year to June 30 of the next. A withdrawal taken in 2026 is assessed against the payment period beginning in July 2027. The cost is real. It is simply not immediate.
The supplement also has to be claimed. Subsection 11(2) bars payment for a month “unless an application for payment of a supplement has been made by the pensioner”, though subsection 11(3.1) lets the Minister waive that requirement where, on the day the person attains 65 years of age, the information already available shows the person qualifies, and subsection 14(1) requires an applicant to “make a statement of the person’s income for the base calendar year”.
The Act does carry relief from being judged on a year that no longer describes a person, and it is narrow. Section 14 of the Old Age Security Act lets an applicant who “ceases to hold an office or employment or ceases to carry on a business” file a statement of estimated income for the year the work stopped rather than being assessed on the base year, under subsection 14(2). Subsection 14(4) does the same for a person who “suffers a loss of income due to termination of or reduction in pension income”. Both are relief for income that has stopped or fallen, so that a newly retired senior is not held to the year they were still working. Neither is relief for choosing to take money out of a RRIF.
Concentrating a drawdown into one year gives up less GIS, before tax takes its share
The right-hand column of the withdrawal table falls once the top-up is spent: 69.8% of the withdrawal gone at $10,000, 59.1% at $23,112. That is the shape of the whole rule in one column. The test is annual, the 75% band is only as wide as the top-up, and the rate drops back to 50% once the top-up is gone.
Two rows of that same table show what follows from it. Taking $20,000 out in a single year gives up $12,106.80 of GIS. Taking $10,000 out in each of two years gives up $6,984.00 twice, which is $13,968.00. Same $20,000 out of the plan, and concentrating it gives up $1,861.20 less GIS. That is a GIS figure rather than a total, because the concentrated year is also the year income tax starts.
Moving money earlier has a limit, and the limit falls before 65 rather than at it. The supplement is assessed on a base calendar year, and the first payment period in which a new pensioner can collect is already being judged on a year that ended before they turned 65. For a 65th birthday from January to May, that first period runs from July of the previous year, so its base calendar year is the year they turned 63. For a birthday from June to December it is the year they turned 64. A withdrawal in either of those years reduces the very first supplement the person ever collects, and neither subsection 14(2) nor subsection 14(4) relieves it, because both cover income that has stopped. Money escapes the supplement entirely only if it leaves the plan before that first base year, which means the year they turn 62 or earlier for a January to May birthday, and the year they turn 63 or earlier for one from June to December.
For a couple it also depends who takes it. Where one spouse is already 65 and collecting and the other is not yet a pensioner, paragraph 12(6)(b) sets the older spouse’s base income on the aggregate of both incomes, at A/24 – B/2, so a withdrawal by the younger spouse reduces the older spouse’s supplement. That $55,392 reconstructed above comes from two things pushing the cut-off up from the $30,528 that applies once both are pensioners: the larger base maximum that applies when the spouse is not a pensioner, and the $382.00 offset in that same formula, with the larger maximum doing more of the work.
Deferring the OAS pension does not sidestep any of this either. Subsection 11(1) says a monthly supplement “may be paid to a pensioner”, and paragraph 11(7)(b) bars one for “any month for which no pension may be paid to the pensioner”, so a person who defers collects no GIS at all through the waiting years. What deferral does not do is cost supplement afterwards, and that is deliberate. Subsection 2.1(1) provides that a reference to the amount of a full monthly pension, which is the pension sitting inside A, means one that has “not been increased under subsection 7.1(1) or (2)”, the provisions that raise a deferred pension, and subsection 2.1(2) says the same of “pensioner’s monthly pension” in subsection 12(5), which is B. Both legs of A minus B are the un-deferred amount, so the deferral increase cancels out of the formula and the supplement comes out identical. The rest of the case for and against waiting is in our piece on deferring OAS to 70.
The same dollar out of a TFSA costs nothing
The CRA states that “any income that you earn in your TFSA will not impact your federal income-tested benefits and credits”, and that “you can also withdraw funds from your TFSA at any time, for any reason, without affecting your eligibility for federal benefits and credits”. It names Old Age Security, the Guaranteed Income Supplement and Employment Insurance among the benefits left alone.
That follows directly from section 2 of the OAS Act. Income is computed under the Income Tax Act, and a TFSA withdrawal is not income under it. A RRIF or RRSP withdrawal is. Same money, same month, same groceries, and one of them costs 75 cents on the dollar while the other costs nothing.
It also means the account order a saver is usually given can invert. For someone whose retirement income will be low enough to collect GIS, the RRSP deduction is worth their lowest-bracket rate on the way in and costs 50 to 75 cents on the dollar on the way out. Assume the contributions were deducted in the lowest bracket: 14% federally and 5.05% in Ontario for 2026, a combined 19.05%. Against 75 cents on the way out, that is a spread of nearly 56 points against the saver. The TFSA has no deduction and no clawback. If that describes a future version of you, the general ranking in our guide to the TFSA, RRSP and FHSA is worth reading against your own numbers rather than taking at face value, because the answer can come out the other way around.
The gap between kinds of income is just as wide. Paragraph 2(b.1) exempts the first $5,000 of earnings, so $3,000 of wages costs this pensioner nothing in GIS. The same $3,000 out of a RRIF costs $1,740.
The minimum withdrawal begins the year after the RRIF is set up
Everything above assumes a pensioner deciding how much to take out. That choice narrows at the end of the year a saver turns 71. Section 146 of the Income Tax Act sets the deadline in paragraph 146(2)(b.4), which requires that a registered plan “does not provide for maturity after the end of the year in which the annuitant attains 71 years of age”. The minimum withdrawal then begins a year later, because the definition of “minimum amount” in subsection 146.3(1) is, “for the year in which the fund was entered into, a nil amount”. So for someone converting at 71 the first required payment falls in the year they turn 72, and from then on an amount leaves the plan whether it is wanted or not. Our RRIF minimum withdrawal calculator works out how large it will be from an age and a balance.
The rate itself is not a loophole or an administrative error. It is what comes out when a 50% income test and an unindexed 25% top-up test apply to the same dollar, written into the Act in plain words, landing on the seniors with the least.
Disclaimer: The content on bestcanadianstocks.ca is for informational and entertainment purposes only and does not constitute financial advice. Past performance is not indicative of future results. Always consult a qualified financial advisor before making investment decisions. Guaranteed Income Supplement and Old Age Security amounts are for the October to December 2026 payment quarter. Tax amounts are 2026.
