Estimated Taxes: Who Pays, How Much, and When (2025)

The tax system is pay-as-you-go

Federal income tax is due as you earn income, not in one lump the following April. Employees satisfy this through payroll withholding. Everyone else — freelancers, investors, landlords, retirees with large distributions — uses estimated tax payments, explained by the IRS — Estimated Taxes.

Do you actually need to pay?

You generally must make estimated payments if you expect to owe $1,000 or more when you file, after subtracting withholding and refundable credits. If all your income is from a W-2 job with adequate withholding, you usually do not — you can even raise your W-4 withholding to cover side income instead of writing quarterly checks.

The safe-harbor rules that prevent penalties

You avoid an underpayment penalty if you pay the smaller of 90% of this year's tax or 100% of last year's tax (110% if your prior-year AGI exceeded $150,000). Paying last year's amount in four equal parts is the simplest way to stay penalty-safe, per IRS Publication 505, Tax Withholding and Estimated Tax and IRS Topic No. 306, Penalty for Underpayment of Estimated Tax.

The 2025 quarterly due dates

Estimated payments for 2025 income are due in four installments: April 15, June 16, September 15, 2025, and January 15, 2026 (dates shift when they fall on a weekend or holiday). You can pay online through IRS Direct Pay or the Electronic Federal Tax Payment System in minutes.

A simple way to estimate

Set aside a fixed percentage of every payment you receive — many self-employed people reserve 25–30% for federal and state taxes combined — and send a quarter of your projected annual tax each period. Recalculate mid-year if your income changes sharply.