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). The term “farming business” is defined in the instructions for Schedule J (Form 1040) (PDF).
Who Can Use Farm Income Averaging
You can elect to use farm income averaging if, in the year of the election, you are engaged in a farming business as an individual, a partner in a partnership, or a shareholder in an S corporation. You do not need to have been engaged in a farming business in any base year.
Who Cannot Use Farm Income Averaging
Corporations, partnerships, S corporations, estates, and trusts cannot use farm income averaging.