How to calculate quarterly taxes in 6 steps

Step 1: Project your net profit for the full year

Net profit is expected revenue minus expected deductible business expenses for the whole calendar year, not just the quarter you're in. Quarterly payments are calculated from that annual projection and then divided by four. Estimating one quarter and multiplying it by four is a common mistake. Our example filer projects $90,000 for the year. If you don't have a full year of history yet, annualize your year-to-date profit and update the projection each quarter.

People often underestimate their expenses. A deduction you forget raises all four payments, not just one. If you'd rather have an app track expenses during the year than reconstruct them in April, the Keeper Tax review covers what that kind of tracking gets you.

Step 2: Calculate self-employment tax

Multiply net profit by 92.35% to get net earnings from self-employment, then apply the 15.3% rate to that base: 12.4% for Social Security up to $184,500 of net earnings for 2026, plus an uncapped 2.9% for Medicare, with an extra 0.9% above $200,000 for a single filer.³ For our example, $90,000 × 92.35% = $83,115.00, and that base × 15.3% comes to $12,716.60 in self-employment tax. See the self-employment tax guide for the mechanics behind that rate. Most filing software shows this figure only at the end of a paid return. To check this step with your own numbers, the Solvent self-employment tax calculator calculates self-employment tax on its own.

Step 3: Subtract the deductible half of self-employment tax

Half of your self-employment tax is an above-the-line deduction, so it lowers your adjusted gross income even if you take the standard deduction. $12,716.60 ÷ 2 = $6,358.30, and subtracting that from net profit gives $90,000 − $6,358.30 = $83,641.70 in adjusted gross income.

Step 4: Subtract your standard deduction and the QBI deduction

The 2026 standard deduction is $16,100 single, $32,200 married filing jointly, or $24,150 head of household, and the Section 199A QBI deduction is 20% of qualified business income, capped at 20% of taxable income before it, and now permanent.⁴ Subtracting both from our example's $83,641.70: $67,541.70 after the standard deduction, minus a $13,508.34 QBI deduction, leaves taxable income at $54,033.36.

Step 5: Apply the 2026 tax brackets

The brackets are marginal. Only the dollars sitting inside a given band pay that band's rate, so crossing into the 22% bracket doesn't push your whole income there. Running $54,033.36 through the table above produces $6,599.34 of federal income tax.

Step 6: Add the two taxes, target 90%, and divide by four

$12,716.60 of self-employment tax plus $6,599.34 of federal income tax comes to $19,315.93. The current-year safe harbor only requires 90% of that total, $17,384.34, and dividing by four puts each quarterly payment at $4,346.09, before subtracting anything already withheld from a W-2 job. Run your own numbers through Solvent's quarterly tax estimator below and compare the results with this example.

How to calculate quarterly taxes from last year's return

If you filed a return last year, pull line 24 from last year's Form 1040, multiply it by 100%, or by 110% if your prior-year AGI topped $150,000 ($75,000 married filing separately), then divide by four. If you pay that amount, the IRS can't assess an underpayment penalty no matter what your income is this year. The prior-year method works best in a rising-income year, while the current-year math above suits a first year in business or a falling-income year. See the safe harbor tax rules guide for how to choose between the two methods.

Why paying the full year in April works

An underpayment only exists when a required installment exceeds what you paid on or before that installment's due date, and payments apply to the earliest unpaid installment first.⁵ A single April payment is made on or before every later due date, so one payment covers all four installments. Paying once suits anyone with front-loaded income or anyone who prefers not to track four separate dates.

Why paying it all in January does not work

Paying it all in January does not work, because each installment is measured on its own due date. If you pay the whole year on January 15, 2027, your April 15 installment sat unpaid for 275 days, your June 15 installment for 214, and your September 15 installment for 122, each accruing an underpayment penalty at the rate in effect that quarter. That charge is simple interest, not daily compounding.

The Form 2210 instructions state that you can owe the penalty for an earlier due date even if you're due a refund when you file. The IRS set 2026's rate at 7% for the first quarter, 6% for the second, and 7% for the third. The Q4 rate is normally announced in early September and wasn't yet available at publication.

Is there an exception for late-arriving income?

Yes. The annualized income installment method calculates each installment based on what you earned in that period, so tax on a large November payment isn't treated as though it was owed in April. The method runs through Form 2210 Schedule AI. See the safe harbor tax rules guide for the multipliers.

Does withholding fix an earlier shortfall?

Withholding can fix an earlier shortfall, under Section 6654(g): tax withheld from a W-2 paycheck is treated as paid in four equal installments across the year regardless of when it was withheld, while an estimated payment counts only on the day it lands. A W-4 Step 4(c) increase in October is treated as 25% paid on April 15, so the increase can retroactively cover a first-quarter shortfall. A December estimated payment can't do that. See the safe harbor tax rules guide for the full explanation under "the withholding trick that fixes earlier quarters."

Does state estimated tax follow the same rules?

State estimated tax doesn't follow the same rules as federal: it runs on its own schedule. Most states roughly follow the federal calendar, but California front-loads its installments 30/40/0/30 instead of splitting them evenly. See the Form 1040-ES guide for vouchers, worksheet lines, and mailing addresses.

Does a quarterly payment replace my annual tax return?

A quarterly payment doesn't replace your annual tax return. A quarterly payment is a prepayment toward the same liability your Form 1040 calculates the following spring. The return is where every credit, deduction, and dollar already sent gets reconciled into one final number. Filing it isn't optional just because you kept up with quarterly payments all year.

What happens if my quarterly payments end up more or less than what I owe?

If you overpay, the IRS refunds the difference once you file. If you fall short of the safe harbor target, you owe a balance plus possible interest on the installments that fell short. A shortfall from a mid-year income change isn't locked in, since the annualized income installment method lets you recalculate later quarters based on what you earned. Either way, your final tax bill is settled on the return.