Investment Income Incentive Act of 1979

Amends the Internal Revenue Code to increase the partial exclusion of dividends from the gross income of an individual from $100 to $500 ($1000 in the case of a married couple filing a joint return), by increments of $100 ($200 in the case of a married couple filing jointly) over the five year period from 1981 through 1985.

Excludes from the gross income of an individual any amount received as interest or dividends on a time or demand deposit with a federally-insured bank, savings and loan association, or credit union. Limits the amount of such interest excluded to a maximum $500 ($1000 in the case of a married couple filing a joint return). Provides for incremental exclusions of interest over a four year transition period from 1981 through 1984. Sets the maximum investment income that may be excluded under this Act at an aggregate $200 ($400 in the case of a married couple filing a joint return).