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.
An annual payment of money by a company or individual to a person called the annuitant. Payment is for a fixed period or the life of the annuitant. Tax consequences depend on the type of contract and funding.