Senior Citizens born prior to 1946 (or the unremarried surviving spouse of a decedent born prior to 1946 who died after reaching age 65) may subtract dividend, interest and capital gains to the extent they are included in adjusted gross income.
The subtraction is limited to $14,274 for single filers and to $28,548 for joint filers for 2024. 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 $9,274 ($14,274 - $5,000 = $9,274).
Mary is 77 years old and has pension of $5,000 and interest income of $4,000.
| Maximum dividend/interest/capital gains deduction |
$14,274 |
| Less pension subtraction |
- $5,000 |
| Allowable dividend/interest/capital gains deduction |
$9,274 |
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 $6,274 ($14,274 - $8,000 = $6,274).
Mary is 77 years old and has pension of $8,000 and interest income of $7,000.
| Maximum dividend/interest/capital gains deduction |
$14,274 |
| Less pension subtraction |
- $8,000 |
| Allowable dividend/interest/capital gains deduction |
$6,274 |
Mary can only subtract $6,274 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 |
$14,274 |
| Less pension subtraction |
- $17,000 |
| Allowable dividend/interest/capital gains deduction |
$0 |
Mary's allowable dividend/interest/capital gains deduction is zero.
