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If you're self-employed, and your personal income is much higher one year than the previous years, can you distribute your reported taxable income to the previous years somehow in order to minimize your taxes?

Donald Trump did it, as I understand it: he subtracted the prior years' losses. However, my "losses" were mainly the opportunity cost of not having a regular salaried job.

  • Yes, but the specific strategies for doing so are quite specific to the circumstances. Can you provide a little more information about the nature of your income? It might be better to just contact an accountant about this rather than a forum. – Glen Pierce Mar 31 '18 at 19:22
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    Not having income doesn’t qualify as a loss that can be carried forward or backward to other tax years. (My apologies if I misunderstood what you meant.) – prl Apr 1 '18 at 3:18
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    One example tactic: contribute to tax deductible retirement plans only in years where your income breaks a particular income bracket. Sell any investments with accrued gains in years where your income is below a particular income bracket. Specific advice requires specific circumstances. – Grade 'Eh' Bacon Apr 2 '18 at 18:41
  • Go read about real estate loss carryover. It's a tax provision specific to real estate. – quid Apr 2 '18 at 20:26
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Income averaging was generally available from 1964 to 1986. Since 1986, it can be used only by farmers and fishermen. https://www.irs.gov/pub/irs-soi/87inar.pdf mentions the repeal.

Income Averaging
Income averaging was repealed for 1987.

This IRS web page describes income averaging for farming: https://www.irs.gov/businesses/small-businesses-self-employed/farm-income-averaging-agriculture-tax-tips

If you are engaged in a farming business, you may be able to average all or some of your current year's farm income by shifting it to the 3 prior years (base years).

(Presumably there is a similar reference for fishing.)

Schedule J is used to elect income averaging. The instructions for schedule J are here: https://www.irs.gov/pub/irs-pdf/i1040sj.pdf

Use Schedule J (Form 1040) to elect to figure your 2017 income tax by averaging, over the previous 3 years (base years), all or part of your 2017 taxable income from your trade or business of farming or fishing. This election may give you a lower tax if your 2017 income from farming or fishing is high and your taxable income for one or more of the 3 prior years was low.

A farming business is the trade or business of cultivating land or raising or harvesting any agricultural or horticultural commodity.

A fishing business is the trade or business of fishing in which the fish harvested, either in whole or in part, are intended to enter commerce or enter commerce through sale, barter, or trade.

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