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income averaging

A method of calculating personal income taxes where taxable income is calculated by an average of the current year's income plus income from the three preceding years. For example, if a person's income for the last five years was $500,000, $600,000, $700,000, $800,000, and $900,000, and $900,000 was the most recent year, the taxable income would be calculated by: ($600,000+$700,000+$800,000+$900,000) / 4 = $750,000. Income averaging was used for individuals with high incomes which would vary from year to year, but the Tax Reform Act of 1986 abolished the practice.

Related information about income averaging:
  1. The Tax Rules for Income Averaging - WSJ.com
    Jul 3, 2011 ... The reason you can't find a reference to income averaging, or a tax form for it, is simple: It was repealed many years ago. But there are some ...
     
  2. IRS Tax Filing Income Averaging Information | eHow.com
    IRS Tax Filing Income Averaging Information. Income averaging is a federal tax code provision for people with widely varying income from one year to the next.
     
  3. Farm Income Averaging - Agriculture Tax Tips
    Nov 6, 2012 ... Farm Income Averaging - Agriculture Tax Tips. If you are engaged in a farming business, you may be able to average all or some of your ...
     
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  5. income averaging - Financial Dictionary - The Free Dictionary
    A former method of spreading out one's tax liability by averaging one's income over 10 years. Income averaging was particularly beneficial to farmers and ...
     
  6. Income Averaging: Definition from Answers.com
    method of computing personal income tax whereby tax is figured on the average of the total of current years income and that of the three preceding years.
     
  7. Farm income averaging may save tax - Gray Gray Gray
    Higher grain prices and increasing milk prices should lead to higher income for farmers and many planning opportunities for accountants. One of the.
     
  8. Income averaging for special professionals 2011-12
    Jun 28, 2012 ... If you are an artist, composer, writer, inventor, performer, production associate or sportsperson, this guide will explain special averaging ...