I just retired and had received a terminal leave payout of $105,000.00 of which I put in 30,000 in a non-taxable 457 plan, 46,000 in my hand, 19,000 in fed tax and 10,000 in NJ state tax. I will be getting another 105,000 in January again but not able to place 30,000 in tax defered plan. Will I be able to average the income over the next few years? A friend told me it was 10 years. Thanks for all answers. Happy New Year to all.

Sorry, but income averaging is no longer available to most taxpayers.

Sorry, but income averaging is no longer available to most taxpayers.

Is that because of the "New tax law" or pre-Obama?

WAY pre-Obama, about 1988 is the last year income averaging was allowed!

Income averaging has been gone for some time except for an averaging convention for farmers/fishermen and the 10 year averaging on lump-sum distributions. You should review Form 4972 and the instructions to determine if you qualify for the lump-sum averaging.

Thanks for the answer

Glad to help!

I doubt that Form 4972 applies in this case, for several reasons:

1. It can be used only if the amount you received is a distribution of the entire balance of your retirement plan.
2. It cannot be used if any portion of the distribution was rolled to another tax-deffered plan.
3. You must also be at least 75 years of age (born before Jan 2 1936).

You can obtain the form and review it here: www.irs.gov/pub/irs-pdf/f4972.pdf