We often get this question during the webinars we give to our colleagues at ING. Below, we’ll explain what averaging out your income means and how to calculate whether this option would be interesting to you.

Say your income in 2021 is high, € 90,000, because you left ING and received a transition payment. In 2022 and 2023 your annual income drops to € 39,000. This means that in three years’ time your cumulative income will have amounted to € 168,000, including a high income in one year (2021) and a low income in the two following years.

Divide by three years
You will probably have paid more income tax in 2021 than in 2022 and 2023. And it is likely that you would have paid less tax if your income in 2021, 2022 and 2023 had been constant, i.e. € 56,000 per year (€ 168,000 divided by three years).

You can get a tax refund
The Dutch tax authorities will allow a tax refund subject to certain conditions. In this example, you could apply for a refund after you’ve received your final tax assessment for the year 2023 in 2024.

Make a note in your diary!
Do you think averaging out your income for the years 2021, 2022 and 2023 will be an interesting option for you? Then make a note in your diary for 2024! Visit the website of the Dutch Tax Administration for more information.