Five-year Averaging

Definition

Income averaging strategy used to determine taxes on a lump-sum distribution as if the distribution occurred over a five-year period, resulting in a reduction of taxes that would otherwise be owed on the amount.

Referring Cite

IRC § 402(d), Treas. Reg. §1.402(e)-2(d)

Additional Helpful Information

The Small Business Job Protection Act of 1996 eliminated the five-year averaging

Related Articles Tutorial or Other Content