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 come off that annual projection and then get divided by four, not the other way around, which is where people get it wrong most often. Our example filer projects $90,000 for the year; without a full year of history yet, annualize your year-to-date profit and revisit the number each quarter.

The expense side is the half people underestimate, and a deduction you forget inflates all four payments rather than just one. If you'd rather have an app catch them during the year than reconstruct them in April, the Keeper Tax review weighs what that kind of tracking actually 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 only shows you this figure at the end of a paid return, so if you want to check just this step against your own numbers, the Solvent self-employment tax calculator runs it 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 qualified business income deduction is 20% of qualified business income, now permanent.⁴ Subtracting both from our example's $83,641.70: $67,541.70 after the standard deduction, minus an $18,000.00 QBI deduction, leaves taxable income at $49,541.70.

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 $49,541.70 through the table above produces $5,697.00 of federal income tax.

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

$12,716.60 of self-employment tax plus $5,697.00 of federal income tax comes to $18,413.60. The current-year safe harbor only requires 90% of that total, $16,572.24, and dividing by four puts each quarterly payment at $4,143.06, before subtracting anything already withheld from a W-2 job. Run your own numbers through Solvent's quarterly tax estimator below and compare them against this chain.

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. Hit that number and the IRS can't assess an underpayment penalty no matter what this year turns out to look like; it's the right tool for 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 the full decision tree.

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 sits on or before every later due date, so all four installments end up covered by one transaction, which suits anyone with front-loaded income or a dislike of tracking four separate dates.

Why paying it all in January does not work

Paying it all in January does not work: run the same logic backward and it falls apart. Pay the whole year on January 15, 2027 and 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 are blunt about it: you can owe the penalty for an earlier due date even if you're due a refund when you file, and 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, there's an exception for income that arrives late in the year, called the annualized income installment method: it computes each installment off what you actually earned in that period, so a big November payday doesn't get treated as though it was owed back in April. It 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 actually withheld, while an estimated payment counts only on the day it lands. A W-4 Step 4(c) increase in October is deemed 25% paid back on April 15 and can retroactively cure a first-quarter shortfall, something a December estimated payment can't do. See the safe harbor tax rules guide for the full mechanic 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 track the federal calendar loosely, 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; it's 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?

Overpay, and the IRS refunds the difference once you file; come in short of the safe harbor target, and 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 recompute later quarters off what actually happened. Either way, the return is the only place the final number gets settled.