Are senior citizens allowed to take a subtraction for dividends, interest and capital gains?

Senior Citizens age 71 and older may subtract dividends, interest and capital gains to the extent they are included in Adjusted Gross Income (AGI). The subtraction is limited to $11,115 for single filers and to $22,229 for joint filers for 2016. These limits must be reduced by any subtraction for retirement benefits.


Senior Citizen filing a single return with $5,000 pension subtraction is only allowed an interest subtraction of $6,115 ($11,115 - $5,000 = $6,115).

Mary is 71 years old and has pension of $5,000 and interest income of $4,000.

Maximum dividend, interest and capital gain deduction $11,115
Less pension subtraction - $5,000
Allowable dividend, interest and capital gain deduction $6,115

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