Guides

Do I need to pay quarterly estimated taxes?

Checked October 17, 2026 · Educational summary

Per the IRS individuals FAQ, you generally must make estimated payments for the current year if both of the following apply.

  1. You expect to owe at least $1,000 in tax for the year after subtracting withholding and refundable credits.
  2. You expect withholding and refundable 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 (110% if last year's AGI was greater than $150,000, or $75,000 if married filing separately). Last year's return must cover 12 months.

There are special rules for farmers and fishers, certain household employers, certain higher-income taxpayers, short tax years, and nonresident aliens. Those rules are in Publication 505.

The two-part test

$1,000 is the expected amount for the year after withholding and refundable credits, not an amount per quarter. A large one-time gain does not automatically create the requirement, and it can. The IRS points to the annualized income installment method in Publication 505 when income is uneven.

The IRS also says you may not owe the underpayment penalty if you had no tax liability for the prior year. Conditions apply. See Publication 505 and the IRS FAQ.

Made-up examples

Illustrations only. They are not a reading of anyone's return.
SituationHow the IRS test reads
Freelancer expects $9,000 of tax and no withholding. Last year's tax was $6,000 and AGI was $60,000.The smaller of 90% ($8,100) and 100% of last year ($6,000) is $6,000. Withholding of $0 is below that, and the amount owed is at least $1,000, so estimated payments are generally required.
A W-2 job withholds $9,500. Expected tax is $9,800.Owed after withholding is $300, under $1,000, so estimated payments are generally not required.
Side income. Expected tax $3,000, withholding $2,950, prior-year tax $2,500.Owed after withholding is $50, under $1,000, so estimated payments are generally not required.

If you have a W-2 job too

You may increase withholding on Form W-4 instead of, or in addition to, estimated payments. The IRS notes this option and mentions the Tax Withholding Estimator on its penalty page.

Next: safe harbor, dates, and self-employment tax. The planner applies this test to numbers you type.

FAQ

Is $1,000 per quarter?

No. In the IRS wording it is the expected amount owed for the year after withholding and refundable credits.

Does a large capital gain trigger it?

The IRS says a sizable gain by itself may not, but it can. Annualizing may help. See Publication 505.

What we could not verify

Uncertain. The special rules for higher-income taxpayers and the other exceptions in Publication 505 were not read in full.

State requirements are not covered.

Sources