Income Averaging (Middeling)
Income averaging (middeling) is a scheme allowing you to average your taxable income in box 1 over three consecutive years. This is especially beneficial when your income fluctuates significantly, for example due to varying assignments as a freelancer, a year without work, or a one-time high income. Due to the progressive tax system, you pay more tax with fluctuating income than with steady income. With averaging, you calculate how much tax you would have paid if your income had been evenly distributed. You get the difference back, minus a threshold of €545. Note: income averaging was abolished from 2023 onwards, but you can still average over periods ending in 2022 at the latest.
Example
In 2020 you earned €20,000, in 2021 €60,000, and in 2022 €25,000. The average is €35,000 per year. Due to progressive rates, you paid more tax than you would have on three times €35,000. After averaging, you get back approximately €1,200 (minus €545 threshold = €655 net).
Why does this matter?
Although income averaging was abolished from 2023, you can still submit an averaging request up to 36 months after the last final assessment for periods ending in 2022. Did you have strongly fluctuating income? Check whether you're still entitled to a refund.
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