Estimated Taxes: Who Pays and When

The United States has a pay-as-you-go tax system. If your income is not covered by withholding, such as self-employment profit, rental income, interest, dividends or capital gains, you are generally expected to send in tax during the year through estimated payments. Missing them can lead to an underpayment penalty even if you pay everything you owe when you file. This guide explains who has to pay, how much, and when.

Who needs to make estimated payments

You usually need to make estimated payments if both of these are true:

1. You expect to owe at least $1,000 in tax for the year after subtracting your withholding and tax credits.
2. You expect your withholding and credits to be less than the smaller of 90% of the tax on this year's return or 100% of the tax on last year's return (which must have covered 12 months).

Typical people who need them are freelancers, gig workers, business owners, landlords, investors with large gains or dividends, and retirees with income that is not subject to withholding. Estimated tax covers more than income tax; it also pays for self-employment tax and any alternative minimum tax. You do not have to pay estimated tax for 2026 if you had no tax liability for 2025, were a U.S. citizen or resident for all of 2025, and your 2025 tax year was a full 12 months.

If you earn wages, you may be able to avoid estimated payments by giving your employer a new Form W-4 to withhold more. See Form W-4 withholding.

The safe harbor rules

The IRS will not charge an underpayment penalty if your withholding and timely payments meet a "safe harbor." The safest approach for most people is the prior-year rule:

• 100% of last year's total tax, or
• 110% of last year's total tax if your adjusted gross income for last year was more than $150,000 ($75,000 if you are married filing separately).

The other safe harbor is 90% of your tax for the current year. Farmers and fishers who earn at least two-thirds of their gross income from farming or fishing have a simpler test. Married couples can make joint estimated payments if they qualify, even if they live apart; they cannot if one spouse is a nonresident alien who has not elected to be taxed as a resident, or if they are legally separated.

Example: Neha's 2025 tax was $20,000 and her 2025 AGI was $210,000. To be safe for 2026 she needs to pay in at least 110% of $20,000, or $22,000, through withholding and estimates. Spread evenly, that is $5,500 per quarter. If she expects her 2026 income to fall, she may choose to pay 90% of the 2026 tax instead, but the prior-year rule does not require projecting income.

2026 due dates

If a date falls on a weekend or legal holiday, the payment is on time if made the next business day. If you file your 2026 return by January 31, 2027 and pay all tax due with it, you do not need to make the January 15 payment. The IRS says that for mailed payments, the postmark date is the date the item is processed at a postal facility, which may be later than the day you drop it in the mailbox. Pay electronically when you can.

How to figure and pay

Use the worksheet in Form 1040-ES to estimate your tax for the year. Start with last year's return as a guide, then adjust for expected changes in income, deductions and credits. For 2026, adjustments might include the new deductions for tips, overtime, car loan interest and seniors, which reduce taxable income but not self-employment tax. See new deductions for tips, overtime and seniors.

You can pay through IRS Direct Pay from a bank account, by debit or credit card or digital wallet (processors charge fees), through your IRS online account, or by mailing a check with a payment voucher. Keep records of every payment so that you can claim all of them on your return.

Uneven income

If your income arrives in lumps, such as bonuses, stock sales or seasonal business revenue, the annualized income installment method on Schedule AI of Form 2210 can reduce or eliminate the penalty. You must file Form 2210 to use it. Wage withholding is treated as paid evenly throughout the year, which also makes a late-year increase in withholding a useful tool.

The penalty

The underpayment penalty is figured separately for each payment period using the interest rate the IRS sets quarterly, so we do not quote a rate here. See our page on the estimated tax penalty. The IRS can calculate it for you, or you can figure it on Form 2210.

Illinois

Illinois individual estimated payments are required if you expect to owe more than $1,000 after Illinois withholding and credits. The due dates match the federal dates, and you use Form IL-1040-ES. The Illinois safe harbors are similar: 90% of this year's tax or 100% of last year's tax in four equal timely installments. See our Illinois guide. Other states have different thresholds.

How we can help

We can project your 2026 income, calculate federal and state payments, set up a calendar of due dates and review whether a withholding change is easier. See tax planning and our tax calendar, or contact us.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.