You generally need to make quarterly estimated payments if you expect to owe at least $1,000 when you file, after withholding and credits. You avoid the underpayment penalty if your withholding and estimates cover at least 90% of this year's tax or 100% of last year's tax, or 110% of last year's if your adjusted gross income was over $150,000.
- You generally owe estimates if you expect to owe $1,000 or more at filing.
- Payments are due April 15, June 15, September 15 and January 15.
- Paying 100% of last year's tax (110% above $150,000 AGI) avoids the penalty.
- Extra W-2 withholding counts as paid evenly through the year.
Who Needs to Pay Estimated Taxes?
Estimated taxes are how income without withholding gets taxed during the year. You may need to pay if you have:
- Rental income
- Self-employment or side business income
- Partnership or S corporation income
- Large investment income or capital gains
When Are Estimated Taxes Due?
| Income earned | Payment due |
|---|---|
| January 1 to March 31 | April 15 |
| April 1 to May 31 | June 15 |
| June 1 to August 31 | September 15 |
| September 1 to December 31 | January 15 of the next year |
When a due date falls on a weekend or legal holiday, it moves to the next business day.
How Do I Avoid the Underpayment Penalty?
You won't owe an underpayment penalty if your total withholding and timely estimates are at least the smaller of:
- 90% of this year's tax, or
- 100% of last year's tax, or 110% if last year's adjusted gross income was more than $150,000 ($75,000 if married filing separately).
The prior-year safe harbor is the simplest. Your payments are known in January, and even if your income jumps, you won't be penalized. You'll just owe the difference in April.
Can I Use W-2 Withholding Instead?
If you also have a job, you can increase your withholding instead of making separate payments. Withholding is treated as paid evenly throughout the year, even if you increase it in December, which makes it a useful fix if you fell behind.
Do I Also Owe State Estimated Taxes?
Most states with an income tax, including New York, have their own estimated payment rules. They often follow similar dates.
Keeping estimates on schedule is part of every Personal CFO engagement, so April doesn't bring surprises.
Quick Questions
What happens if I miss an estimated payment?
The IRS charges an underpayment penalty that works like interest on the amount that was late. Paying as soon as you can reduces it.
Do I need to pay estimates in my first year with rental income?
If you'll owe $1,000 or more at filing, generally yes. But if your payments cover 100% of last year's tax (110% at higher incomes), you won't be penalized even if this year's income is higher.