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

Senior Citizens age 73 and older may subtract dividends, interest and capital gains to the extent they are included in adjusted gross income.
The subtraction is limited to $11,495 for single filers and to $22,991 for joint filers for 2018. 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 $6,495 ($11,495 - $5,000 = $6,495).

Mary is 73 years old and has pension of $5,000 and interest income of $4,000.

Maximum dividend/interest/capital gain deduction $11,495
Less pension subtraction - $5,000
Allowable dividend/interest/capital gain deduction $6,495


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 $3,495 ($11,495 - $8,000 = $3,495).

Mary is 73 years old and has pension of $8,000 and interest income of $4,000.

Maximum dividend/interest/capital gain deduction $11,495
Less pension subtraction - $8,000
Allowable dividend/interest/capital gain deduction $3,495


Mary can only subtract $3,495 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 73 years old and has pension of $17,000 and interest income of $4,000.

Maximum dividend/interest/capital gain deduction $11,495
Less pension subtraction - $17,000
Allowable dividend/interest/capital gain deduction $0


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