To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year.
When figuring your 2009 estimated tax, it may be helpful to use your income, deductions, and credits for 2008 as a starting point. Use your 2008 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.
The instructions for Form 1040-ES include a worksheet to help you figure your estimated tax. Keep the worksheet for your records.
Use the worksheet (Figure 2-B) on page 22 to help guide you through the information about completing the 2009 Estimated Tax Worksheet. You also will find a blank worksheet on page 35. taxmap/pubs/p505-012.htm#en_us_publink10007351
Your expected AGI for 2009 (line 1) is your expected total income minus your expected adjustments to income.taxmap/pubs/p505-012.htm#en_us_publink10007352
Include in your total income all the income you expect to receive during the year, even income that is subject to withholding. However, do not include income that is tax exempt.
Total income includes all income and loss for 2009 that, if you had received it in 2008, would have been included on your 2008 tax return in the total on line 22 of Form 1040, line 15 of Form 1040A, or line 4 of Form 1040EZ.
Social security and railroad retirement benefits. If you expect to receive social security or tier 1 railroad retirement benefits during 2009, use Worksheet 2-1 on page 36 to figure the amount of expected taxable benefits you should include on line 1.
Be sure to subtract from your expected total income all of the adjustments you expect to take on your 2009 tax return. If you are using your 2008 return as a guide and filed Form 1040, your adjustments for 2008 were on lines 23–35, plus any write-in adjustments on line 36. If you filed Form 1040A, your 2008 adjustments were on lines 16–19.
Self-employed. If you expect to have income from self-employment, use Worksheet 2-2 on page 37 to figure your expected self-employment tax and your deduction for one-half of your self-employment tax. Include the amount from line 11 of Worksheet 2-2 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.
Reduce your expected AGI for 2009 (line 1) by either your expected itemized deductions or your standard deduction and by your exemptions (lines 2 through 5). taxmap/pubs/p505-012.htm#en_us_publink10007357
If you expect to claim itemized deductions on your 2009 tax return, enter the estimated amount on line 2.
Itemized deductions are the deductions that can be claimed on Schedule A of Form 1040.
Phaseout of itemized deductions. For 2009, your total itemized deductions may be reduced if your AGI is more than $166,800 ($83,400 if married filing separately). If you expect your AGI to be more than that amount, use Worksheet 2-4 on page 39 to figure the amount to enter on line 2.
If you expect to claim the standard deduction on your 2009 tax return, enter the amount on line 2. Use Worksheet 2-3 on page 38 to figure your standard deduction. taxmap/pubs/p505-012.htm#en_us_publink10007360
The standard deduction for some individuals is zero. Your standard deduction will be zero if you:
- File a separate return and your spouse itemizes deductions,
- Are a dual-status alien, or
- File a return for a period of less than 12 months because you change your accounting period.
After you have subtracted either your expected itemized deductions or your standard deduction from your expected AGI, reduce the amount remaining by $3,650 for each exemption you expect to take on your 2009 tax return. If another person (such as your parent) can claim an exemption for you on his or her tax return, you cannot claim your own personal exemption. This is true even if the other person will not claim your exemption or the exemption will be reduced or eliminated under the phaseout rule.
Reduction of personal exemption amount. For 2009, your deduction for personal exemptions is reduced if your AGI is larger than the AGI shown below for your filing status.
|Married filing jointly or qualifying widow(er)||$250,200|
|Married filing separately||$125,100|
|Head of household||$208,500|
If you expect your AGI to be more than that amount, use Worksheet 2-5 on page 39 to figure the amount to enter on line 4.
However, if in 2009 you housed individuals displaced by a Midwestern disaster, read the following section and complete Worksheet 2-6 on page 40 before entering an amount on line 4.
Taxpayers housing individuals displaced by a Midwestern disaster.
You may be able to claim an additional exemption amount of $500 per person (up to $2,000) if you provided housing to a person who was displaced from his or her main home because of a Midwestern disaster and all of the following apply.
- The person displaced lived in your main home for at least 60 consecutive days that ended in 2009.
- You did not receive any rent or other amount from any source for providing the housing.
- The main home of the person displaced was in a Midwestern disaster area on the applicable disaster date for that county.
- The person displaced was not your spouse or dependent.
- You did not claim an additional exemption amount in 2008 for the same individual.
- You did not claim the maximum exemption amount of $2,000 in 2008.
Use Worksheet 2-6 on page 40 to figure the additional exemption amount. For more information, see Publication 4492-B.
After you have figured your expected taxable income (line 5), follow the steps below to figure your expected taxes, credits, and total tax for 2009. Most people will have entries for only a few of these steps. However, you should check every step to be sure you do not overlook anything.taxmap/pubs/p505-012.htm#en_us_publink10007364
Figure your expected income tax (line 6). Generally, you will use the 2009 Tax Rate Schedules, found on page 40 or in the instructions to Form 1040-ES, to figure your expected income tax. However, see below for situations where you must use a different method to compute your estimated tax.taxmap/pubs/p505-012.htm#en_us_publink10007365
You must use a special method to figure tax on the income of the following children who have more than $1,900 of investment income.
- Children under age 18 at the end of 2009.
- The following children if their earned income is not more than half their support.
- Children age 18 at the end of 2009.
- Children who are full-time students over age 18 and under age 24 at the end of 2009.
See Publication 929, Tax Rules for Children and Dependents. Although the ages and dollar amounts in the publication will be different in the 2009 revision, this reference will give you basic information for figuring the tax.
The regular income tax rates for individuals do not 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.taxmap/pubs/p505-012.htm#en_us_publink10007367
Generally, the maximum tax rate for qualified dividends is 15% (0% for people whose other income is taxed at the 10% or 15% rate).
Tax on capital gain and qualified dividends. If the amount on line 1 includes a net capital gain or qualified dividends, use Worksheet 2-7 on page 41 to figure your tax.
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 2-8 on page 42 to figure your estimated tax.
Total your expected taxes (line 8). Include on line 8 the sum of:
- Your tax on line 6;
- Your expected alternative minimum tax (AMT) from Form 6251 (or included on Form 1040A, line 28) on line 7;
- Your expected additional taxes from Form 8814, Parents' Election To Report Child's Interest and Dividends, and Form 4972, Tax on Lump-Sum Distributions (line 44, boxes a and b, of the 2008 Form 1040); and
- Any recapture of education credits.
Subtract your expected credits (line 9). If you are using your 2008 return as a guide and filed Form 1040, your total credits for 2008 were shown on line 55. If you filed Form 1040A, your total credits for 2008 were on line 34.
If your credits on line 9 are more than your taxes on line 8, enter "-0-" on line 10 and go to Step 4. taxmap/pubs/p505-012.htm#en_us_publink10007372
Add your expected self-employment tax (line 11). You already should have figured your self-employment tax (see Self-employed under Expected AGI—Line 1 on page 21). taxmap/pubs/p505-012.htm#en_us_publink10007373
Add your expected other taxes (line 12).
Other taxes include:
- Additional tax on early distributions from:
- An IRA or other qualified retirement plan,
- A tax-sheltered annuity, or
- A modified endowment contract entered into after June 20, 1988;
- Advance earned income credit payments;
- Household employment taxes (before subtracting advance EIC payments made to your employee(s)) if:
- You will have federal income tax withheld from wages, pensions, annuities, gambling winnings, or other income, or
- You would be required to make estimated tax payments even if you did not include household employment taxes when figuring your estimated tax; and
- Amounts written in on Form 1040 on the line for "total tax" (line 61 on the 2008 Form 1040). But, do not include tax on recapture of a federal mortgage subsidy, tax on 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 employee social security, Medicare, or RRTA tax on tips or group-term life insurance.
- Repayment of the first-time homebuyer credit if the home will cease to be your main home in 2009. See Form 5405 for exceptions.
If you filed a 2008 Form 1040A, your only other tax was any advance earned income credit payments on line 36.taxmap/pubs/p505-012.htm#en_us_publink10007374
Subtract your refundable credits (line 13b). These include your expected earned income credit, additional child tax credit, Form 4136 fuel tax credit, Form 5405 first-time homebuyer credit, Form 8801 (line 30) refundable credit for prior year minimum tax, Form 8885 health coverage tax credit, Making Work Pay credit (see Worksheet 2-9 on page 43), and Form 8863 refundable Hope education credit. These are shown on the 2008 Form 1040, lines 64a, 66, 68b, 68c, 68d, and 69, if they were 2008 refundable credits.
To figure your expected fuel tax credit, do not include fuel tax for the first three quarters of the year that you expect to have refunded to you.
The earned income credit is shown on the 2008 Form 1040A, line 40a, and the additional child tax credit is shown on line 41.
The result of steps 1 through 6 is your total estimated tax for 2009 (line 13c).taxmap/pubs/p505-012.htm#en_us_publink10007375
On lines 14a through 14c, figure the total amount you must pay for 2009, through withholding and estimated tax payments, to avoid paying a penalty.taxmap/pubs/p505-012.htm#en_us_publink10007376
The total amount you must pay is the smaller of:
- 90% of your total expected tax for 2009, or
- 100% of the total tax shown on your 2008 return. Your 2008 tax return must cover all 12 months.
There are special rules for certain small businesses and higher income taxpayers and for farmers and fishermen. taxmap/pubs/p505-012.htm#en_us_publink1000145964
If more than 50% of your gross income from 2008 was income from a small business and your AGI in 2008 was less than $500,000 ($250,000 if you are married filing separate returns in 2009), substitute 90% for 100% in (2) above. Your business is a small business if it had an average of fewer than 500 employees in 2008. taxmap/pubs/p505-012.htm#en_us_publink10007378
If your AGI for 2008 was more than $150,000 ($75,000 if your filing status for 2009 is married filing separately), substitute 110% for 100% in (2) above. This rule does not apply to farmers and fishermen.
For 2008, 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_publink10007379
Jeremy Martin's total tax on his 2008 return was $42,581, and his expected tax for 2009 is $71,253. His 2008 AGI was $180,000. Because Jeremy had more than $150,000 of AGI in 2008, he figures his required annual payment as follows. He determines that 90% of his expected tax for 2009 is $64,128 (.90 × $71,253). Next, he determines that 110% of the tax shown on his 2008 return is $46,839 (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_publink10007380
If at least two-thirds of your gross income for 2008 or 2009 is from farming or fishing, your required annual payment is the smaller of:
- 662/3% (.6667) of your total tax for 2009, or
- 100% of the total tax shown on your 2008 return. (Your 2008 tax return must cover all 12 months.)
For definitions of "gross income from farming" and "gross income from fishing," see Farmers and Fishermen, under Special Rules beginning on page 20. taxmap/pubs/p505-012.htm#en_us_publink10007381
Your 2008 total tax on Form 1040 is the amount on line 61 reduced by the following.
- The amounts on lines 58, 64a, 66, and 69.
- The following amounts from Form 5329 included on line 59.
- Any tax on excess contributions to IRAs, Archer MSAs, Coverdell education savings accounts, and health savings accounts.
- Any tax on excess accumulations in qualified retirement plans.
- The following amounts included on line 61.
- Recapture of a federal mortgage subsidy.
- Tax on 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.
- Uncollected employee social security, Medicare, or railroad retirement tax on tips or group-term life insurance.
- Any credit from Form 4136, Form 8801, or Form 8885 included on line 68.
On the 2008 Form 1040A, it is the amount on line 37 reduced by the amount on lines 40a and 41. On the 2008 Form 1040EZ, it is the amount on line 11 reduced by the amount on line 8a. taxmap/pubs/p505-012.htm#en_us_publink10007382
Use lines 15 and 16a to figure the total estimated tax you must pay for 2009. Subtract your expected withholding from your required annual payment (line 14c). You usually must pay this difference in four equal installments. See When To Pay Estimated Tax on this page and How To Figure Each Payment on page 25.
You do not have to pay estimated tax if:
- Line 14c minus line 15 is zero or less, or
- Line 13c minus line 15 is less than $1,000.
Your expected withholding for 2009 (line 15) includes the income tax you expect to be withheld from all sources (wages, pensions and annuities, etc.). It also includes excess social security and railroad retirement tax you expect to be withheld from your wages.
For this purpose, you will have excess social security or tier 1 railroad retirement tax withholding for 2009 only if your wages from two or more employers are more than $106,800. See Excess Social Security or Railroad Retirement Tax Withholding in chapter 3.