Annualized Income

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DEFINITION of 'Annualized Income'

An estimate of the amount of money that an individual, business or asset will earn over the course of a year. Annualized income is usually calculated with less than one year's worth of data, so it is only an estimate of how much income will actually be earned for the year. Nonetheless, annualized income figures can be helpful for creating budgets and making estimated income tax payments.

BREAKING DOWN 'Annualized Income'

To calculate annualized income, multiply the earned income figure by the number of months in a year divided by the number of months of income data available. For example, if a consultant earned $10,000 in January, $12,000 in February, $9,000 in March and $13,000 in April, the earned income figure for those four months would be $44,000. To annualize the consultant's income, multiply $44,000 by 12/4 to get $132,000.

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