Estimated tax payments are quarterly payments you send to the IRS if you owe taxes that won't be covered by withholding from a paycheck or other income sources

If you earn money from rental property, a home-based business, or other self-employment tied to your house, the IRS expects you to pay taxes four times a year instead of waiting until April. These estimated tax payments cover federal income tax, self-employment tax, and sometimes state taxes. You calculate what you think you'll owe for the year, divide it by four, and send that amount on specific dates set by the IRS.

The goal is to avoid a large tax bill in April and penalties for underpayment. If you don't pay enough through the year, the IRS charges interest on what you owe. If you pay too much, you get a refund when you file your return.

Key Takeaways

  • Estimated tax payments are due on April 15, June 15, September 15, and January 15 of the following year, though the exact dates shift slightly when they fall on weekends or holidays.
  • You calculate your estimated tax by projecting your annual income and subtracting deductions, then dividing the result by four — or you can use last year's tax bill as a starting point.
  • You pay using Form 1040-ES and either mail a check, pay online through IRS Direct Pay or EFTPS, or use a credit card through an approved payment processor.
  • Underpaying estimated taxes results in penalties and interest, even if you have a refund coming when you file your full return in April.
  • If your income changes significantly during the year, you can adjust your remaining payments rather than overpaying for months you didn't earn as much.

The four payment dates and how they work

The IRS sets four payment deadlines each year. For 2024, they are April 15, June 17, September 16, and January 16, 2025. These dates move slightly year to year because the IRS adjusts them when they fall on weekends or federal holidays. Check the IRS website or your Form 1040-ES instructions each year to confirm the exact dates.

Each payment covers roughly three months of income. The first payment (due in April) covers January through March. The second (June) covers April through May. The third (September) covers June through August. The fourth (January) covers September through December. You don't have to pay the same amount each quarter — you can adjust if your income is uneven.

If you miss a deadline, you can still pay, but you'll owe penalties and interest from the due date forward. The penalty is calculated daily, so paying late in the quarter costs less than paying after the next quarter begins.

How to calculate what you owe each quarter

Start by estimating your total income for the year from all sources — rental income, self-employment income, investment income, or anything else that won't have taxes withheld. Subtract the deductions you expect to claim: mortgage interest, property taxes, repairs, depreciation on rental property, home office expenses, or business supplies. The result is your estimated taxable income.

Multiply that by your expected tax rate. If you're unsure of your rate, use the federal tax brackets for your filing status, or look at last year's return to see what percentage of your income went to federal tax. Add self-employment tax if you're self-employed (roughly 15.3% on 92.35% of your net self-employment income). The total is your estimated federal tax for the year.

Divide that number by four to get your quarterly payment. Form 1040-ES includes a worksheet that walks you through this calculation. Alternatively, if your income is stable year to year, you can divide last year's total tax bill by four and use that as your quarterly payment — this method protects you from penalties as long as you pay at least 90% of this year's tax or 100% of last year's tax (110% if your adjusted gross income last year was over $150,000).

Payment methods: check, online, or credit card

You have three main ways to pay. The oldest is mailing a check with a payment voucher (the tear-off stub from Form 1040-ES) to the IRS address listed in the form instructions. Include your Social Security number, tax year, and the quarter you're paying for on the check itself.

Online payment through IRS Direct Pay is free and takes a few minutes. You go to irs.gov, enter your personal information and bank account details, and schedule the payment for the due date. The IRS deducts the money from your account on the date you choose. EFTPS (Electronic Federal Tax Payment System) is another free option that requires advance enrollment but lets you schedule payments in batches.

You can also pay by credit or debit card through approved third-party processors like PayPal, Square, or others listed on the IRS website. These processors charge a convenience fee (usually 1.87% to 2.35% of the payment), so you pay more but get the transaction recorded immediately and can track it easily.

What happens if you underpay or overpay

If you pay less than you owe for the year, the IRS charges a penalty called the underpayment penalty. The penalty is based on how much you underpaid, how long you underpaid it, and the current interest rate (which changes quarterly). Even if you end up with a refund when you file your return in April, you still owe the penalty for the months you didn't pay enough. The penalty is separate from the tax itself and can add hundreds of dollars to your bill.

If you pay more than you owe, you'll receive a refund when you file your tax return. You can choose to get the refund by check, direct deposit, or apply it to next year's estimated taxes. There's no penalty for overpaying, but you lose the use of that money for months, so it's worth trying to estimate accurately.

Adjusting payments if your income changes

If your income drops or rises significantly during the year, you don't have to stick with the same payment every quarter. You can recalculate based on what you've actually earned so far and adjust your remaining payments. This is especially useful if you had a strong first half of the year but business slowed, or vice versa.

To adjust, recalculate your total estimated tax for the year using your actual income through the current quarter plus your best estimate for the rest of the year. Subtract what you've already paid in earlier quarters. Divide the remaining amount by the number of quarters left in the year. That's your new quarterly payment going forward.

For example, if you paid $2,000 per quarter for the first two quarters but your income dropped in July, you can recalculate for the third and fourth quarters and pay less. This keeps you from overpaying and gives you more cash flow when you need it.

State and local estimated taxes

Many states require their own estimated tax payments on the same schedule as federal payments. Some states use the same due dates; others set their own. A few states have no income tax at all. Check your state's tax authority website or ask a tax professional what your state requires.

Some cities also tax income or business revenue. If you live in a city with a local income tax (like New York City or Philadelphia), you may need to make separate estimated payments to the city as well. The rules and due dates vary by location, so it's worth confirming before the first payment is due.

Frequently Asked Questions

Do I have to make estimated tax payments if I own rental property?

Yes, if your rental income isn't offset by enough deductions to eliminate your tax liability. If you have a mortgage, property taxes, insurance, repairs, and depreciation that reduce your taxable income to zero or a loss, you may not owe estimated taxes. But if you have positive taxable income from rent, the IRS expects quarterly payments.

What if I can't pay the full amount by the due date?

Pay what you can. The penalty is calculated on the unpaid balance, so paying something late is better than paying nothing. If you can't pay at all, contact the IRS about a payment plan. You'll still owe penalties and interest, but a plan lets you spread the cost over time.

Can I use last year's tax return to figure out this year's payment?

Yes. If your income is similar year to year, you can pay 90% of this year's tax or 100% of last year's tax (110% if your income was over $150,000 last year) and avoid penalties, even if you underpay. This is called the safe harbor rule and is built into Form 1040-ES.

Do I get a refund if I overpay estimated taxes?

Yes. When you file your tax return in April, the IRS compares what you paid in estimated taxes to what you actually owe. If you paid too much, you get a refund by check, direct deposit, or credit toward next year's taxes.

What if I didn't know I needed to make estimated tax payments?

You can start making them at any point during the year. The penalty applies only to the quarters you underpaid, so starting in July is better than not starting at all. Recalculate based on your income through that point and your estimate for the rest of the year, then pay the adjusted amount for the remaining quarters.