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May I claim a subtraction for dividend/interest/capital gains if I am a senior citizen?
Senior Citizens age 77 and older may subtract dividend, interest and capital gains to the extent they are included in adjusted gross income.
The subtraction is limited to $12,697 for single filers and to $25,394 for joint filers for 2022. 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 $7,697 ($12,697 - $5,000 = $7,697).
Mary is 77 years old and has pension of $5,000 and interest income of $4,000.
Maximum dividend/interest/capital gains deduction | $12,697 |
Less pension subtraction | - $5,000 |
Allowable dividend/interest/capital gains deduction | $7,697 |
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 $4,697 ($12,697 - $8,000 = $4,697).
Maximum dividend/interest/capital gains deduction | $12,697 |
Less pension subtraction | - $8,000 |
Allowable dividend/interest/capital gains deduction | $4,697 |
Mary can only subtract $4,697 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 77 years old and has pension of $17,000 and interest income of $4,000.
Maximum dividend/interest/capital gains deduction | $12,697 |
Less pension subtraction | - $17,000 |
Allowable dividend/interest/capital gains deduction | $0 |
Mary's allowable dividend/interest/capital gains deduction is zero.