Handbook / Estimated tax

Estimated tax safe harbor for the 2026 tax year: the 90%, 100% and 110% tests

Tax-year note: Tax information on this page applies to the 2026 tax year (returns filed in 2027), from IRS pages checked in November 2026. Figures and dates are labelled with their tax year where they appear. Check current IRS pages before you rely on them.

Estimated tax is easier once you stop trying to predict your exact tax bill and aim instead for the safe harbor: an amount that, if paid on time, keeps you clear of the underpayment penalty. The rules are short. This guide explains them for the 2026 tax year, using figures from the 2026 Form 1040-ES and the IRS penalty page checked in November 2026, and shows how to turn them into a payment plan.

The rules for 2026

According to the 2026 Form 1040-ES, you generally must make estimated payments for 2026 only if both of these apply:

1. You expect to owe at least $1,000 for 2026 after subtracting withholding and refundable credits.
2. Your withholding and refundable credits will be less than the smaller of 90% of the tax to be shown on your 2026 return or 100% of the tax shown on your 2025 return, which must cover all 12 months.

Higher income. If your 2025 adjusted gross income was more than $150,000, or more than $75,000 if married filing separately for 2026, the form says to use 110% of your 2025 tax instead of 100%.

The IRS penalty page frames the same idea from the other side: you may avoid the penalty if your return shows you owe less than $1,000, or if you paid at least the smaller of 90% of the current year's tax or 100% of the prior year's, with the higher percentage for higher-income taxpayers.

What "tax" means here

The tax in these tests is your total tax for the year, which for self-employed people includes self-employment tax, minus refundable credits. The IRS penalty page describes the tax shown on the return as total tax minus total refundable credits. So when you look at last year's return, use the total tax figure, not just income tax.

Two ways to aim

The prior-year route. Take your 2025 total tax, apply 100% or 110%, subtract expected 2026 withholding, and pay the remainder in four installments. Its strength is certainty: the number is known on day one, and it protects you even if 2026 turns out far better than 2025. Its drawback: in a much better year you will owe a large balance at filing, so set money aside anyway.

The current-year route. Project your 2026 tax, take 90%, subtract withholding and pay in installments. It can mean smaller payments in a weaker year. Its weakness: if your projection is low, you may fall short of 90% and owe a penalty.

A worked example

Example (2026 tax year): A freelance designer's 2025 total tax was $9,600 and her 2025 AGI was $68,000, so the 100% test applies. She has no withholding. 100% of $9,600 is $9,600, or $2,400 per installment. She pays $2,400 on April 15, June 15 and September 15, 2026 and January 15, 2027. Even if her 2026 tax turns out to be $13,000, she has met the prior-year test, though she will owe the $3,400 difference when she files.

If her 2025 AGI had been over $150,000, she would have used 110% instead.

Timing matters

The safe harbor is not just an annual total. The 2026 Form 1040-ES sets four due dates: April 15, June 15 and September 15, 2026, and January 15, 2027. The IRS calculates the penalty based on the amount of each underpayment and the period it was unpaid. Paying everything in January may not avoid a penalty for earlier installments.

Two adjustments help people with uneven income:

• Annualized income installment method. The IRS penalty page says that if your income varies during the year, you can complete Form 2210 Schedule AI, which matches required payments to when income was actually earned.
• Withholding. If you also have a job, the IRS notes that withholding counts toward your payments. Raising withholding late in the year is a common way to make up a shortfall.

When your situation changes

• Starting a business mid-year. The 2026 Form 1040-ES says that if a large change in income after March 31, 2026 requires you to start making payments, you can figure them with the annualized method.
• A first year with little prior-year tax. If your 2025 tax was low, 100% of it is a low bar, but you will owe the rest at filing. Read the form's "Who Must Pay Estimated Tax" section for your case.
• A very good year. The prior-year route still protects you from the penalty, but save for the balance.

Practical setup

1. Look up your 2025 total tax and AGI.
2. Choose your route and calculate the four installments.
3. Schedule them through your IRS Online Account, Direct Pay or EFTPS.
4. Keep confirmations in your tax folder.
5. Mid-year, compare 2026 profit with 2025 and adjust savings.

The guide on Form 1040-ES covers payment methods, and the guide on the underpayment penalty explains what happens if you miss.

For 2026, pay at least the smaller of 90% of this year's tax or 100% of last year's (110% above the AGI threshold), on time each quarter, and the penalty generally will not apply.