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Frequently Asked Tax Questions

Estimated Tax - Large Gains, Lump Sum Distributions, etc.

  1. If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?

Rev. date: 02/14/2013

If I anticipate a sizable capital gain on the sale of an investment during the year, do I need to make a quarterly estimated tax payment during the tax year?

You must pay estimated tax for the current tax year if both of the following apply:
*Note:  Certain taxpayers with higher adjusted gross income must substitute 110% for 100%.  If you are making estimated tax payments you can:
You may be able to annualize your income and make increased estimated tax payments in the later quarters.  You would have to file Form 2210 with your tax return because we do not know when you received the income and that you received it unevenly over the year.
Note: Publication 505, Tax Withholding and Estimated Tax, has a "Qualified Dividend and Capital Gains Worksheet" to help estimate the additional tax liability.  It is important to remember that the net gain on capital gains is generally taxed at a lower tax rate than your ordinary income.