No. of Recommendations: 2
I got in the habit really quickly (after year 1) of just paying what I owed the previous year. If I end up owing more than that, there is no penalty because part of the rule is to pre-pay at least as much as you owed the previous year (unless you know you will owe less). So I already did my "estimated tax" payment by paying what I owed in 2024. If it turns out to be more in 2025, at least there won't be a penalty. We'll see.
That works depending on your income.
he safe harbor estimated tax has three components, which we’ll outline here.
Generally, an underpayment penalty can be avoided if you use the safe harbor rule for payments described below. The IRS will not charge you an underpayment penalty if:
You pay at least 90% of the tax you owe for the current year, or 100% of the tax you owed for the previous tax year, or
You owe less than $1,000 in tax after subtracting withholdings and credits
This rule is altered slightly for high-income taxpayers. If the on your previous year’s return is over $150,000 (over $75,000 if you are married filing separately), you must pay the lower of 90% of the tax shown on the current year’s return or 110% of the tax shown on the return for the previous year.
