Income-Averaging Comparison
Compare elected income at a current rate with the average of three caller-supplied prior rates.
Description
An income-averaging comparison applies three supplied rates through their arithmetic mean.
An income-averaging comparison applies three supplied rates through their arithmetic mean. It compares that flat-rate result with a current-rate calculation on the same income.1
Compare elected income at a current rate with the average of three caller-supplied prior rates.
When to use Income-Averaging Comparison
Use this tool to compare elected income at a current rate with the average of three caller-supplied prior rates.
Choose the specific arithmetic or checklist scenario and establish its input amounts, dates, rates and criteria from the applicable records. Keep currencies, periods and jurisdictions consistent; review the tool-specific assumptions before interpreting the result.
How to use Income-Averaging Comparison and understand its results
- Choose the specific arithmetic or checklist scenario and establish its input amounts, dates, rates and criteria from the applicable records. Keep currencies, periods and jurisdictions consistent; review the tool-specific assumptions before interpreting the result.
- Enter electedFarmIncome, currentMarginalRatePercent, priorThreeMarginalRatesPercent using the field table and calculation rules, then run the tool.
- Read currentRateTax, averagedRateTax, estimatedTaxDifference. The explanation below defines the units, signs, ordering and any flags or placeholder values.
- If the tool reports an input issue, correct the values and run it again. Apply the stated assumptions when interpreting a successfully returned result.
| Input field | Meaning | Value type; see rules below | Requirement |
|---|---|---|---|
| electedFarmIncome | Elected farm income (currency) | number; minimum: 0 | Required |
| currentMarginalRatePercent | Current marginal rate (%) | number; minimum: 0 | Required |
| priorThreeMarginalRatesPercent | Prior three marginal rates (%) | list of number | Required |
Enter nonnegative income/current rate and exactly three nonnegative rates. Calculate the arithmetic mean rate, then return tax at the current rate, tax at the mean rate and their signed difference.
averageRate=(r1+r2+r3)/3; savings=income×(currentRate−averageRate)/100 Units, indexing, boundary conditions and exceptional cases are defined in the calculation rules above.
| Output field | Meaning | Value type |
|---|---|---|
| currentRateTax | Tax at current rate (currency) | number; minimum: 0 |
| averagedRateTax | Tax using prior-rate average (currency) | number; minimum: 0 |
| estimatedTaxDifference | Current-rate tax minus averaged tax (currency) | number |
{
"input": {
"electedFarmIncome": 90000,
"currentMarginalRatePercent": 30,
"priorThreeMarginalRatesPercent": [
15,
20,
25
]
},
"output": {
"currentRateTax": 27000,
"averagedRateTax": 18000,
"estimatedTaxDifference": 9000
}
}Limitations and assumptions
This averages rates directly; it does not reallocate income through progressive brackets or implement a statutory farm-income-averaging return.
Numeric inputs must be finite. Follow the calculation-specific rules for overflow, underflow and exceptional cases. Lists are limited to 100,000 entries; the rules above may require smaller limits. Missing required fields, extra fields, wrong value types and violations of the calculation rules are input errors.
Alternative or Complementary methods
Use Worldwide Tax Comparison: Compare caller-parameterized citizenship- and residence-based tax scenarios. For a complementary task, use Total Tax Burden: Combine supplied tax categories into a total and effective burden.
References
-
Income-Averaging Comparison — tool.io
Similar or alternative tools
- Worldwide Tax Comparison
Compare caller-parameterized citizenship- and residence-based tax scenarios.
- Total Tax Burden
Combine supplied tax categories into a total and effective burden.