May I claim a subtraction for dividend/interest/capital gains if I am a senior citizen?

Senior Citizens age 75 and older may subtract dividend, interest and capital gains to the extent they are included in adjusted gross income.
The subtraction is limited to $11,983 for single filers and to $23,966 for joint filers for 2020. These limits must be reduced by any subtraction
for retirement benefits.

Example 1: Eligible for full subtraction;

Senior Citizen filing a single return with $5,000 pension subtraction is only allowed an interest subtraction of $6,983 ($11,983 - $5,000 = $6,983).

Mary is 75 years old and has pension of $5,000 and interest income of $4,000.

Maximum dividend/interest/capital gains deduction $11,983
Less pension subtraction - $5,000
Allowable dividend/interest/capital gains deduction $6,983


Mary can subtract all $4,000 of interest income.

 

Example 2: Eligible for partial subtraction;

Senior Citizen filing a single return with $8,000 pension subtraction is only allowed an interest subtraction of $3,983 ($11,983 - $8,000 = $3,983).

Mary is 75 years old and has pension of $8,000 and interest income of $4,000.

Maximum dividend/interest/capital gains deduction $11,983
Less pension subtraction - $8,000
Allowable dividend/interest/capital gains deduction $3,983


Mary can only subtract $3,983 of interest income. 

 

Example 3: Not eligible for subtraction;

Senior Citizen filing a single return with $17,000 pension subtraction is not allowed an interest subtraction.

Mary is 75 years old and has pension of $17,000 and interest income of $4,000.

Maximum dividend/interest/capital gains deduction $11,983
Less pension subtraction - $17,000
Allowable dividend/interest/capital gains deduction $0


Mary's allowable divident/interest/capital gains deduction is zero.