The Estimated Tax Safe Harbor: 90%, 100% and the 110% Rule

The underpayment penalty is figured on Form 2210. You generally don't owe it if your payments, made on time, add up to at least the smaller of:

• 90% of the tax on your 2026 return, or
• 100% of the tax on your 2025 return — 110% if your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately).

The prior-year option needs a 2025 return that covered all 12 months. You also owe no penalty if your 2026 tax minus withholding is under $1,000, or if you had no tax liability for 2025 and were a U.S. citizen or resident all year (Topic 306).

Which to use

Last year's tax is fixed and known, so it's the easy target when this year is going better. If this year is going worse, 90% of this year's tax may be lower — but it's an estimate until December ends.

Withholding counts

Federal income tax withheld from W-2 wages is treated as paid evenly through the year, whenever it was actually withheld — so raising withholding at a day job late in the year can fix earlier quarters.

Last reviewed 2026-10-28. General information, not tax advice. Your tax adviser can tell you what applies to you.