How to Calculate Estimated Taxes
A plain-English step-by-step walkthrough. No jargon, no confusion.
By Reba Donaldson · Last reviewed: April 2026
The two methods
The IRS gives you two ways to calculate your quarterly payments. Use whichever results in the lower payment — as long as you meet the threshold, you won't be penalized.
Method 1: Safe Harbor (recommended)
Pay 100% of last year's total tax liability divided across four equal quarterly payments. If your adjusted gross income last year exceeded $150,000, pay 110% instead.
This is the simplest approach because you already know the number — it's on your prior year's tax return (Form 1040, line 24 for total tax). Divide by four. Pay that amount each quarter. Done.
The advantage: even if you earn significantly more this year, you won't owe any underpayment penalty as long as you've paid the safe harbor amount.
Method 2: 90% of current year's estimated tax
Estimate your total income for the current year, calculate your expected tax liability, and pay 90% of that amount across four quarters. This works well if your income is relatively predictable and similar to prior years.
This method requires more judgment — you're estimating future income — but it can result in lower payments if you expect to earn less this year than last.
Step-by-step calculation
Step 1: Find your prior year total tax. Look at Form 1040, line 24 (or line 15 on older forms). This is your baseline for the safe harbor method.
Step 2: Divide by four. This is your base quarterly payment.
Step 3: If your prior year AGI exceeded $150,000 (or $75,000 if married filing separately), multiply the total by 1.10 before dividing by four.
Step 4: Pay that amount by each quarterly deadline: April 15, June 15, September 15, and January 15.
Example
Maria is a freelance designer. Last year, her Form 1040 showed a total tax of $12,400. Her AGI was under $150,000. Her safe harbor quarterly payment is $12,400 ÷ 4 = $3,100 per quarter.
Even if Maria earns more this year and ends up owing $15,000, she won't face an underpayment penalty — she covered her safe harbor amount in full.
Use our calculator
Our estimated tax calculator walks you through this process automatically. Enter a few numbers and it gives you the exact quarterly payment amount for your situation.