How do I calculate estimated taxes?

Estimate your total income and deductions for the year, calculate the resulting tax liability, subtract any expected withholding and credits, then divide the remainder by four. Pay each quarter by the IRS deadline using Form 1040-ES or IRS Direct Pay.

Estimated taxes are quarterly payments to the IRS for income not covered by payroll withholding — self-employed workers, freelancers, landlords, and investors typically need to make them. The IRS outlines the calculation process in Form 1040-ES and its accompanying worksheet. There are two main approaches: project your actual current-year liability, or use the safe harbor rule to guarantee penalty avoidance regardless of what you earn.

Method 1 — Safe harbor (simplest, most reliable)

The safe harbor rule lets you avoid the underpayment penalty entirely by basing your payments on last year's tax liability rather than this year's projected income. Pay 100% of your prior-year federal tax in four equal installments (or 110% if your prior-year adjusted gross income exceeded $150,000). The main advantage: once you've paid the safe harbor amount, you're penalty-free even if your income is much higher this year. The main disadvantage: if income drops, you'll overpay and wait for a refund at filing.

Method 2 — Project current-year income

Step 1: Estimate your total gross income for the year — wages, self-employment revenue, rental income, investment income, and any other taxable sources.
Step 2: Subtract expected above-the-line deductions (retirement contributions, HSA, SE tax deduction) to get estimated AGI, then subtract the standard deduction (or estimated itemized deductions) and any qualified business income (QBI) deduction.
Step 3: Apply the tax brackets to the resulting taxable income to estimate your federal income tax. Include self-employment tax (15.3% on net SE earnings, calculated on Schedule SE) separately.
Step 4: Subtract any expected tax credits (child tax credit, education credits, etc.) to get estimated total tax liability.
Step 5: Subtract any W-2 withholding for the year. Divide the remainder by 4 — that's each quarterly payment.
Reforecast each quarter if income changes significantly — especially for seasonal businesses.

Payment deadlines and how to pay

The four estimated tax payment due dates are typically April 15, June 15, September 15, and January 15 of the following year. When a date falls on a weekend or holiday, it shifts to the next business day. Pay via IRS Direct Pay (free bank transfer), the IRS2Go app, EFTPS (Electronic Federal Tax Payment System, free — requires prior enrollment), or by mailing a check with Form 1040-ES. State estimated taxes are separate — check your state's department of revenue for its own deadlines and payment options.

IRS estimated tax facts

Taxpayers can avoid the estimated tax underpayment penalty by paying at least 100% of the prior year's tax liability (or 110% if prior-year AGI exceeded $150,000) — this is the safe harbor rule. — IRS — Form 1040-ES
The IRS Form 1040-ES package includes a worksheet for projecting current-year income, deductions, and credits to calculate estimated tax payments more precisely than the safe harbor method. — IRS — Form 1040-ES
Estimated tax payments can be made for free through IRS Direct Pay (direct bank transfer) or the Electronic Federal Tax Payment System (EFTPS), with no processing fees. — IRS — Pay Online

Key takeaways

The safe harbor method — pay 100% (or 110%) of last year's total tax — is the simplest way to avoid underpayment penalties.
To project current-year liability: estimate income, subtract deductions and credits, add self-employment tax, then divide by four.
Quarterly due dates are typically April 15, June 15, September 15, and January 15 — missing one triggers a penalty even if you pay annually.
Pay for free via IRS Direct Pay or EFTPS; no account or registration required for Direct Pay.
Reforecast mid-year if your income changes significantly — over- or underpaying by a large amount has cash-flow consequences.