Income averaging capital gains?

[John Midwest]

I had a very large increase in my 2018 federal tax due to capital gains from financial assets I sold to pay for work on my house. I thought that income tax averaging over multiple years was a thing of the past, but I’ve since heard (Ric Edelman radio program) that it is permitted in certain cases. I’m wondering if I might qualify.

I paid $3,100 in 2015 federal tax, $3,300 in 2016, $5,300 in 2017, and $43,000 in 2018. I’ve been retired for 7 years, I’ve never been a farmer or fisherman, and the assets I sold were long-term holdings in a taxable brokerage account. (I do own as an investment an 80-acre farm that that I rent out each year.) Is there any provision of the federal tax code that might allow me to file an amended return for 2018 that would result in a partial refund of the $43,000 I paid?

Thanks for any feedback you provide.

 

[LdiJ]

I had a very large increase in my 2018 federal tax due to capital gains from financial assets I sold to pay for work on my house. I thought that income tax averaging over multiple years was a thing of the past, but I’ve since heard (Ric Edelman radio program) that it is permitted in certain cases. I’m wondering if I might qualify.

I paid $3,100 in 2015 federal tax, $3,300 in 2016, $5,300 in 2017, and $43,000 in 2018. I’ve been retired for 7 years, I’ve never been a farmer or fisherman, and the assets I sold were long-term holdings in a taxable brokerage account. (I do own as an investment an 80-acre farm that that I rent out each year.) Is there any provision of the federal tax code that might allow me to file an amended return for 2018 that would result in a partial refund of the $43,000 I paid?

Thanks for any feedback you provide.

Income averaging is only available for farm income. The fact that you have a farm that you rent out, does not mean that you have the ability to do income averaging on income that is not farm related. A capital gain is not income from farming.

 

[Taxing Matters]

I paid $3,100 in 2015 federal tax, $3,300 in 2016, $5,300 in 2017, and $43,000 in 2018. I’ve been retired for 7 years, I’ve never been a farmer or fisherman, and the assets I sold were long-term holdings in a taxable brokerage account. (I do own as an investment an 80-acre farm that that I rent out each year.) Is there any provision of the federal tax code that might allow me to file an amended return for 2018 that would result in a partial refund of the $43,000 I paid?

There is no income averaging for investment income and capital gains. You did get the benefit of the lower long term capital gains rates, however, which is itself a pretty good deal.

 

[davew9128]

Income averaging (except in the limited stated instance) went away IIRC early in the Clinton administration.

 

[FlyingRon]

It was 1986, so it was Reagan's administration.

 

[John Midwest]

Thanks, everyone, for the feedback. I appreciate your information.