To figure your estimated tax, you must figure your expected AGI, taxable income, taxes, deductions, and credits for the year.
When figuring your 2010 estimated tax, it may be helpful to use your income, deductions, and credits for 2009 as a starting point. Use your 2009 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 20 to help guide you through the information about completing the 2010 Estimated Tax Worksheet. You also will find a blank worksheet on page 33. taxmap/pubs/p505-012.htm#en_us_publink10007351
Your expected AGI for 2010 (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 2010 that, if you had received it in 2009, would have been included on your 2009 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 2010, use Worksheet 2-1
on page 35 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 2010 tax return. If you are using your 2009 return as a guide and filed Form 1040, your adjustments for 2009 were on lines 23 through 35, plus any write-in adjustments on line 36. If you filed Form 1040A, your 2009 adjustments were on lines 16 through 19.
If you expect to have income from self-employment, use Worksheet 2-2
on page 36 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 2010 (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 2010 tax return, enter the estimated amount on line 2.
Itemized deductions are the deductions that can be claimed on Schedule A (Form 1040).taxmap/pubs/p505-012.htm#en_us_publink10007359
If you expect to claim the standard deduction on your 2010 tax return, enter the amount on line 2. Use Worksheet 2-3
on page 36 to figure your standard deduction.
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 2010 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.taxmap/pubs/p505-012.htm#en_us_publink10007363
After you have figured your expected taxable income (line 5), follow the steps below to figure your expected taxes, credits, and total tax for 2010. 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 2010 Tax Rate Schedules
, found on page 34 or in the instructions to Form 1040-ES, to figure your expected income tax.
If line 5 is $35,000 and your filing status is single, you would use Schedule X of the 2010 Tax Rate Schedules. Your income is over $34,000 but less than $82,400. Subtract $34,000 from $35,000. Multiply $1,000 ($35,000 – 34,000) by 25% (1,000 × .25 = $250). Add $250 to $4,681.25. Enter $4,931 on line 6.
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 2010.
- The following children if their earned income is not more than half their support.
- Children age 18 at the end of 2010.
- Children who are full-time students over age 18 and under age 24 at the end of 2010.
See Publication 929, Tax Rules for Children and Dependents. Although the ages and dollar amounts in the publication may be different in the 2010 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 2-4
on page 37 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 2-5
on page 38 to figure your estimated tax.
Total your expected taxes (line 8). Include on line 8 the sum of the following.
- Your tax on line 6.
- Your expected alternative minimum tax (AMT) on line 7 from Form 6251, line 36, or included on Form 1040A, line 28.
- Your expected additional taxes from Form 8814, Parents' Election To Report Child's Interest and Dividends, and Form 4972, Tax on Lump-Sum Distributions.
- Any recapture of education credits.
Subtract your expected credits (line 9). If you are using your 2009 return as a guide and filed Form 1040, your total credits for 2009 were shown on line 54. If you filed Form 1040A, your total credits for 2009 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 19).
Add your expected other taxes (line 12).
Other taxes include the following.
- 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 (EIC) 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.
- Amounts written in on Form 1040 on the line for "total tax" (line 60 on the 2009 Form 1040). But, do not include recapture of a federal mortgage subsidy; tax on excess 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 social security and Medicare tax or RRTA tax on tips or group-term life insurance; or recapture of COBRA health insurance premium assistance.
- Repayment of the first-time homebuyer credit if the home will cease to be your main home in 2010. See Form 5405 for exceptions.
If you filed a 2009 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 making work pay credit (see Worksheet 2-6
on page 39), earned income credit, Form 8812 additional child tax credit, Form 8863 refundable education credit, Form 4136 fuel tax credit, Form 5405 first-time homebuyer credit, Form 8801 refundable credit for prior year minimum tax, and Form 8885 health coverage tax credit. These are shown on the 2009 Form 1040, lines 63 (making work pay credit only), 64a, 65, 66, 67, and 70.
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.
If you filed Form 1040A in 2009, the refundable credits (making work pay credit, earned income credit, additional child tax credit and refundable education credit) were shown on lines 40 (making work pay credit only), 41a, 42, and 43.
The result of steps 1 through 6 is your total estimated tax for 2010 (line 13c).taxmap/pubs/p505-012.htm#en_us_publink10007375
On lines 14a through 14c, figure the total amount you must pay for 2010, 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 2010, or
- 100% of the total tax shown on your 2009 return. Your 2009 tax return must cover all 12 months.
There are special rules for higher income taxpayers and for farmers and fishermen. taxmap/pubs/p505-012.htm#en_us_publink10007378
If your AGI for 2009 was more than $150,000 ($75,000 if your filing status for 2010 is married filing separately), substitute 110% for 100% in (2) above. This rule does not apply to farmers and fishermen.
For 2009, 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 2009 return was $42,581, and his expected tax for 2010 is $71,253. His 2009 AGI was $180,000. Because Jeremy had more than $150,000 of AGI in 2009, he figures his required annual payment as follows. He determines that 90% of his expected tax for 2010 is $64,128 (.90 × $71,253). Next, he determines that 110% of the tax shown on his 2009 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 2009 or 2010 is from farming or fishing, your required annual payment is the smaller of:
- 662/3% (.6667) of your total tax for 2010, or
- 100% of the total tax shown on your 2009 return. (Your 2009 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
discussed on page 18.
Your 2009 total tax, if you filed Form 1040, is the amount on line 60 reduced by the following.
- Unreported social security and Medicare tax or RRTA tax from Forms 4137 or 8919 (line 57).
- The following amounts from Form 5329 included on line 58.
- 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 write-ins on line 60.
- Excise tax on excess golden parachute payments (identified as "EPP").
- Excise tax on insider stock compensation from an expatriated corporation (identified as "ISC").
- Look-back interest due under section 167(g) (identified as "From Form 8866").
- Look-back interest due under section 460(b) (identified as "From Form 8697").
- Recapture of federal mortgage subsidy (identified as "FMSR").
- Recapture of COBRA health insurance premium assistance (identified as "COBRA").
- Uncollected social security and Medicare tax or RRTA tax on group-term life insurance (identified as "UT").
- Any refundable credit amounts listed on lines 63, 64a, 65, 66, and 67, and refundable credits from Forms 4136, 8801, and 8885 listed on line 70.
If you filed Form 1040A, your 2009 total tax is the amount on line 37 reduced by any refundable credits on lines 40, 41a, 42, and 43.
If you filed Form 1040EZ, your 2009 total tax is the amount on line 11 reduced by the amount on lines 8 and 9a. taxmap/pubs/p505-012.htm#en_us_publink10007382
Use lines 15 and 16a to figure the total estimated tax you may be required to pay for 2010. 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
and How To Figure Each Payment
on this page.
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 2010 (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.