Submitted By: Jjean
Answered: June 10, 2014 8:30 am

Is income averaging still available?

Income averaging for all taxpayers was a way to effectively lower the tax rate on this year’s income by spreading it over a number of prior (lower-income) years to find an average tax rate for it. The general 4-year income averaging rule expired in 1986. Currently, income averaging can only be used by farmers and fishermen for their business income and, in some cases, for lump-sum retirement plan distributions.

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Tax Glossary

Real estate professional

An individual who, because of his or her real estate activity, qualifies to deduct rental losses from nonpassive income.

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