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Fluctuations in income over the years, claim a tax refund by averaging out the years

It is possible that you have significant changes in your income over the years due to unemployment, bonuses or other reasons. In the good years you paid a lot of income tax, in the not so good years you paid less tax. On average it is possible that you paid too much income tax. It is possible to claim back a part of the too much income tax paid. How does it work?

First the income tax returns over the concerning years have to be filed and the tax office needs to have finalized these years with a final income tax assessment. These assessments you can recognize by the assessment number ending after the H with a six. So H86, H96, H06, H16 or H26. The six can also be a higher number, not lower. If lower, then the assessment is not final yet.

One of the conditions is that you need to have been a tax resident for the full year. If you arrived or departed in a year, then those years cannot qualify for the averaging out (middeling).

The averaging out has a threshold amount of EUR 1.200. Below this amount no refund, only the excess is paid. The number of years over which you can average out the income is three years. Once you used a year you cannot use it again in a following request.

Averaging out the income over the years is only useful when the income go from one tax bracket to the other. If your income drops from EUR 150.000 to EUR 60.000 then this is still a significant decrease in income, but the income remains in the same tax bracket at the top of 52%. But if you had an income of EUR 150.000, then unemployment of EUR 36.000 and then again in income of EUR 50.000, averaging out can be successful.

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