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IRS.gov Website
Publication 505
taxmap/pubs/p505-012.htm#en_us_publink1000194588

How To Figure Estimated Tax(p24)

For Use in Calendar Year 2017
rule
To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year.
When figuring your 2018 estimated tax, it may be helpful to use your income, deductions, and credits for 2017 as a starting point. Use your 2017 federal tax return as a guide. You can use Form 1040-ES to figure your estimated tax. Nonresident aliens use Form 1040-ES (NR) to figure estimated tax.
You must make adjustments both for changes in your own situation and for recent changes in the tax law. Some of these changes are discussed earlier under What's New for 2018. For information about these and other changes in the law, visit the IRS website at IRS.gov.
The instructions for Form 1040-ES include a worksheet to help you figure your estimated tax. Keep the worksheet for your records.
taxmap/pubs/p505-012.htm#en_us_publink1000194590

2018 Estimated Tax Worksheet(p24)

For Use in Calendar Year 2017
rule
Use Worksheet 2-1 to help guide you through the information about completing the 2018 Estimated Tax Worksheet. You can also find a copy of the worksheet in the instructions for Form 1040-ES.
taxmap/pubs/p505-012.htm#en_us_publink1000194594

Expected AGI—Line 1(p24)

For Use in Calendar Year 2017
rule
Your expected AGI for 2018 (line 1) is your expected total income minus your expected adjustments to income.
taxmap/pubs/p505-012.htm#en_us_publink1000194595

Total income.(p24)

For Use in Calendar Year 2017
rule
Include in your total income all the income you expect to receive during the year, even income that is subject to withholding. However, don’t include income that is tax exempt.
Total income includes all income and loss for 2018 that, if you had received it in 2017, would have been included on your 2017 tax return in the total on line 22 of Form 1040, line 15 of Form 1040A, or line 4 of Form 1040EZ.
Pencil
Social security and railroad retirement benefits. If you expect to receive social security or tier 1 railroad retirement benefits during 2018, use Worksheet 2-2 to figure the amount of expected taxable benefits you should include on line 1.
taxmap/pubs/p505-012.htm#en_us_publink1000194598

Adjustments to income.(p24)

For Use in Calendar Year 2017
rule
Be sure to subtract from your expected total income all of the adjustments you expect to take on your 2018 tax return.
Pencil
Self-employed. If you expect to have income from self-employment, use Worksheet 2-3 to figure your expected self-employment tax and your allowable deduction for self-employment tax. Include the amount from Worksheet 2-3 in your expected adjustments to income. If you file a joint return and both you and your spouse have net earnings from self-employment, each of you must complete a separate worksheet.
taxmap/pubs/p505-012.htm#en_us_publink1000194601

Expected Taxable Income— Line 2(p24)

For Use in Calendar Year 2017
rule
Reduce your expected AGI for 2018 (line 1) by either your expected itemized deductions or your standard deduction.
taxmap/pubs/p505-012.htm#en_us_publink1000194602

Itemized deductions—line 2a.(p24)

For Use in Calendar Year 2017
rule
If you expect to claim itemized deductions on your 2018 tax return, enter the estimated amount on line 2a.
Itemized deductions are the deductions that can be claimed on Schedule A (Form 1040).
taxmap/pubs/p505-012.htm#en_us_publink1000194604

Standard deduction—line 2a.(p24)

For Use in Calendar Year 2017
rule
If you expect to claim the standard deduction on your 2018 tax return, enter the amount on line 2a. Use Worksheet 2-4 to figure your standard deduction.
taxmap/pubs/p505-012.htm#en_us_publink1000194606
No standard deduction.(p24)
The standard deduction for some individuals is zero. Your standard deduction will be zero if you:
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Expected Taxes and Credits— Lines 4–11c(p24)

For Use in Calendar Year 2017
rule
After you have figured your expected taxable income (line 3), follow the steps next to figure your expected taxes, credits, and total tax for 2018. Most people will have entries for only a few of these steps. However, you should check every step to be sure you don’t overlook anything.
taxmap/pubs/p505-012.htm#en_us_publink1000194610

Step 1.(p24)

For Use in Calendar Year 2017
rule
Figure your expected income tax (line 4). Generally, you will use the 2018 Tax Rate Schedules to figure your expected income tax.
However, see below for situations where you must use a different method to figure your estimated tax.
taxmap/pubs/p505-012.htm#en_us_publink1000194612
Tax on child's investment income.(p24)
You must use a special method to figure tax on the income of the following children who have more than $2,100 of investment income.
  1. Children under age 18 at the end of 2018.
  2. The following children if their earned income isn’t more than half their support.
    1. Children age 18 at the end of 2018.
    2. Children who are full-time students at least age 19 but under age 24 at the end of 2018.
See Pub. 929, Tax Rules for Children and Dependents. Although the ages and dollar amounts in the publication may be different in the 2017 revision, this reference will give you basic information for figuring the tax.
taxmap/pubs/p505-012.htm#en_us_publink1000194613
Tax on net capital gain.(p24)
The regular income tax rates for individuals don’t apply to a net capital gain. Instead, your net capital gain is taxed at a lower maximum rate.
The term "net capital gain" means the amount by which your net long-term capital gain for the year is more than your net short-term capital loss.
Pencil
Tax on capital gain and qualified dividends. If the amount on line 1 includes a net capital gain or qualified dividends, use Worksheet 2-5 to figure your tax.
Note. The tax rate on your capital gains and dividends will depend on your income.
Pencil
Tax if excluding foreign earned income or excluding or deducting foreign housing. If you expect to claim the foreign earned income exclusion or the housing exclusion or deduction on Form 2555 or Form 2555-EZ, use Worksheet 2-6 to figure your estimated tax.
taxmap/pubs/p505-012.htm#en_us_publink1000194619

Step 2.(p25)

For Use in Calendar Year 2017
rule
Total your expected taxes (line 6). Include on line 6 the sum of the following.
  1. Your tax on line 6.
  2. Your expected alternative minimum tax (AMT) from Form 6251, or included on Form 1040A.
  3. Your expected additional taxes from Form 8814, Parents' Election To Report Child's Interest and Dividends, and Form 4972, Tax on Lump-Sum Distributions.
  4. Any recapture of education credits.
taxmap/pubs/p505-012.htm#en_us_publink1000194620

Step 3.(p25)

For Use in Calendar Year 2017
rule
Subtract your expected credits (line 7). If you are using your 2017 return as a guide and filed Form 1040, your total credits for 2017 were shown on line 55. If you filed Form 1040A, your total credits for 2017 were on line 36.
Note. If you expect to claim the credit for other dependents on your 2018 tax return, include this on line 7. Also keep in mind that the child tax credit has been increased for 2018.
If your credits on line 7 are more than your taxes on line 6, enter "0" on line 8 and go to Step 4.
taxmap/pubs/p505-012.htm#en_us_publink1000194621

Step 4.(p25)

For Use in Calendar Year 2017
rule
Add your expected self-employment tax (line 9). You already should have figured your self-employment tax (see Self-employed under Expected AGI—Line 1, earlier).
taxmap/pubs/p505-012.htm#en_us_publink1000194623

Step 5.(p25)

For Use in Calendar Year 2017
rule
Add your expected other taxes (line 10).
Other taxes include the following. The total of these taxes are entered on line 10.
  1. Additional tax on early distributions from:
    1. An IRA or other qualified retirement plan,
    2. A tax-sheltered annuity, or
    3. A modified endowment contract entered into after June 20, 1988.
  2. Household employment taxes if:
    1. You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income; or
    2. You would be required to make estimated tax payments even if you didn’t include household employment taxes when figuring your estimated tax.
  3. Amounts written on Form 1040 on the line for "other taxes" (line 62 on the 2017 Form 1040). But don’t include recapture of a federal mortgage subsidy; tax on excess golden parachute payments; look-back interest due under section 167(g) or 460(b) of the Internal Revenue Code; excise tax on insider stock compensation from an expatriated corporation; or uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance.
  4. Repayment of the first-time homebuyer credit. See Form 5405.
  5. Additional Medicare Tax. A 0.9% Additional Medicare Tax applies to your combined Medicare wages and self-employment income and/or your RRTA compensation that exceeds the amount listed in the following chart, based on your filing status.
    Filing Status Threshold Amount
    Married filing jointly$250,000
    Married filing separately$125,000
    Single$200,000
    Head of household$200,000
    Qualifying Widow(er)$200,000

    Medicare wages and self-employment income are combined to determine if your income exceeds the threshold. A self-employment loss should not be considered for purposes of this tax. RRTA compensation should be separately compared to the threshold. Your employer is responsible for withholding the 0.9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2018. You should consider this withholding, if applicable, in determining whether you need to make an estimated payment.
  6. Net Investment Income Tax (NIIT). The NIIT is 3.8% of the lesser of your net investment income or the excess of your MAGI over the amount listed in the following chart, based on your filing status.
    Filing Status Threshold Amount
    Married filing jointly$250,000
    Married filing separately$125,000
    Single$200,000
    Head of household$200,000
    Qualifying Widow(er)$250,000

taxmap/pubs/p505-012.htm#en_us_publink1000194624

Step 6.(p25)

For Use in Calendar Year 2017
rule
Subtract your refundable credits (line 11c). These include the earned income credit, additional child tax credit, fuel tax credit, net premium tax credit, refundable American opportunity credit, and refundable amount from Form 8885.
To figure your expected fuel tax credit, don’t include fuel tax for the first 3 quarters of the year that you expect to have refunded to you.
The result of Steps 1 through 6 is your total estimated tax for 2018 (line 11c).
taxmap/pubs/p505-012.htm#en_us_publink1000194625

Required Annual Payment— Line 12c(p25)

For Use in Calendar Year 2017
rule
On lines 12a through 12c, figure the total amount you must pay for 2018, through withholding and estimated tax payments, to avoid paying a penalty.
taxmap/pubs/p505-012.htm#en_us_publink1000194626

General rule.(p25)

For Use in Calendar Year 2017
rule
The total amount you must pay is the smaller of:
  1. 90% of your total expected tax for 2018, or
  2. 100% of the total tax shown on your 2017 return. Your 2017 tax return must cover all 12 months.
taxmap/pubs/p505-012.htm#en_us_publink1000194627

Special rules.(p25)

For Use in Calendar Year 2017
rule
There are special rules for higher income taxpayers and for farmers and fishermen.
taxmap/pubs/p505-012.htm#en_us_publink1000194628
Higher income taxpayers.(p25)
If your AGI for 2017 was more than $150,000 ($75,000 if your filing status for 2018 is married filing separately), substitute 110% for 100% in (2) above. This rule does not apply to farmers and fishermen.
For 2017, AGI is the amount shown on Form 1040, line 37; Form 1040A, line 21; and Form 1040EZ, line 4.
taxmap/pubs/p505-012.htm#en_us_publink1000194629
Example.(p25)
Jeremy Martin's total tax on his 2017 return was $42,581, and his expected tax for 2018 is $71,253. His 2017 AGI was $180,000. Because Jeremy had more than $150,000 of AGI in 2017, he figures his required annual payment as follows. He determines that 90% of his expected tax for 2018 is $64,128 (90% (0.90) × $71,253). Next, he determines that 110% of the tax shown on his 2017 return is $46,839 (110% (1.10) x $42,581). Finally, he determines that his required annual payment is $46,839, the smaller of the two.
taxmap/pubs/p505-012.htm#en_us_publink1000194630
Farmers and fishermen.(p25)
If at least two-thirds of your gross income for 2017 or 2018 is from farming or fishing, your required annual payment is the smaller of:
  1. 662/3% (0.6667) of your total tax for 2018, or
  2. 100% of the total tax shown on your 2017 return. (Your 2017 tax return must cover all 12 months.)
For definitions of "gross income from farming" and "gross income from fishing," see Farmers and Fishermen, earlier, under Special Rules.
taxmap/pubs/p505-012.htm#en_us_publink1000194632

Total tax for 2017—line 12b.(p25)

For Use in Calendar Year 2017
rule
Your 2017 total tax, if you filed Form 1040, is the amount on line 63 reduced by the following.
  1. Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 58).
  2. The following amounts from Form 5329 included on line 59.
    1. Any tax on excess contributions to an IRA, Archer MSA, Coverdell education savings account, health savings account, and ABLE account.
    2. Any tax on excess accumulations in qualified retirement plans.
  3. The following write-ins on line 62.
    1. Excise tax on excess golden parachute payments (identified as "EPP").
    2. Excise tax on insider stock compensation from an expatriated corporation (identified as "ISC").
    3. Look-back interest due under section 167(g) (identified as "From Form 8866").
    4. Look-back interest due under section 460(b) (identified as "From Form 8697").
    5. Recapture of federal mortgage subsidy (identified as "FMSR").
    6. Uncollected social security and Medicare tax or RRTA tax on tips or group-term life insurance (identified as "UT").
  4. Any shared responsibility payment on line 61.
  5. Any refundable credit amounts on lines 66a, 67, 68, 69, and 72, and credit from Form 8885 included on line 73.
If you filed Form 1040A, your 2017 total tax is the amount on line 39 reduced by the amount on line 38, and any refundable credits on lines 42a, 43, 44, and 45.
If you filed Form 1040EZ, your 2017 total tax is the amount on line 12 reduced by the amount on lines 8a and 11.
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Total Estimated Tax Payments Needed—Line 14a(p26)

For Use in Calendar Year 2017
rule
Use lines 13 and 14a to figure the total estimated tax you may be required to pay for 2018. Subtract your expected withholding from your required annual payment (line 12c). You usually must pay this difference in four equal installments. See When To Pay Estimated Tax and How To Figure Each Payment , later.
You don’t have to pay estimated tax if:
taxmap/pubs/p505-012.htm#en_us_publink1000194636

Withholding—line 13.(p26)

For Use in Calendar Year 2017
rule
Your expected withholding for 2018 (line 13) includes the income tax you expect to be withheld from all sources (wages, pensions and annuities, etc.). It includes excess social security and tier 1 railroad retirement tax you expect to be withheld from your wages and compensation. For this purpose, you will have excess social security or tier 1 railroad retirement tax withholding for 2018 only if your wages and compensation from two or more employers are more than $128,400. See Excess Social Security or Railroad Retirement Tax Withholding in chapter 3.
It also includes Additional Medicare Tax you expect to be withheld from your wages or compensation. Your employer is responsible for withholding the 0.9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000.