How to Calculate Estimated Tax Payments

Learn to calculate quarterly estimated tax payments using last year's tax or current year income projections.

1. Gather your prior year tax information. Find line 24 on your previous year's Form 1040 — this shows your total tax liability. You'll use this as your baseline for the safe harbor rule. If you earned over $150,000 last year, you'll need to pay 110% of this amount to avoid penalties.
2. Calculate your safe harbor payment. Multiply last year's total tax by 1.00 (if income was under $150,000) or 1.10 (if over $150,000). Divide this number by 4 to get your quarterly payment amount. This method guarantees no penalties, even if you owe more tax this year.
3. Estimate this year's income and deductions. Add up your projected income from all sources — wages, freelance work, investment gains, side hustles. Subtract your expected deductions (standard deduction is $14,600 for single filers, $29,200 for married filing jointly in 2026). This gives you your estimated taxable income.
4. Calculate this year's projected tax liability. Use tax brackets to calculate income tax on your estimated taxable income. Add self-employment tax (15.3% on freelance income over $400). Don't forget state taxes if your state has income tax. This total is your projected tax liability for the year.
5. Choose your payment method. Compare your safe harbor amount (Step 2) with 90% of this year's projected tax (Step 4). Use whichever is smaller — this minimizes your quarterly payments while avoiding penalties. Divide your chosen annual amount by 4 for quarterly payments.
6. Subtract withholdings and make payments. Reduce your quarterly payment by any taxes already withheld from paychecks or other sources. Pay the remaining amount by the quarterly due dates: January 15, April 15, June 15, and September 15. Use Form 1040ES or pay online through the IRS website.