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.

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Originally Posted by AtlantaTaxExpert

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

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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