Who Needs to Make Estimated Tax Payments
If you expect to owe at least $1,000 in federal income tax after withholding and credits, the IRS requires quarterly estimated payments. This applies to:
- Freelancers and self-employed individuals
- Partners, S corporation shareholders, and LLC members with pass-through income
- Investors with significant dividend, capital gain, or rental income
- Employees who significantly under-withheld on their W-4
The 2026 quarterly deadlines are April 15, June 16, September 15, and January 15, 2027.
Missing a deadline does not cost you a flat fee. The IRS charges interest on the underpayment from the due date through the date you pay. Catching up in a later quarter stops the interest but does not retroactively eliminate it for the missed period.
Two Methods to Avoid the Penalty
You avoid the underpayment penalty entirely if you satisfy at least one of two safe harbors:
Method 1: Prior-Year Safe Harbor
Pay at least 100% of your 2025 tax liability spread across four equal payments. If your 2025 adjusted gross income exceeded $150,000 (or $75,000 for married filing separately), the threshold rises to 110%.
This method is simple because you already know your 2025 tax. Divide by four and pay that amount each quarter. No estimation required.
Method 2: 90% of Current-Year Tax
Pay at least 90% of what you actually owe for 2026. If you end up paying 90% or more through quarterly payments and withholding, no penalty applies even if you owe a balance at filing.
This method requires estimating your 2026 income, deductions, and credits throughout the year. It is more work, but it pays off when your 2026 tax liability is meaningfully lower than 2025.
Where OBBBA Deductions Change the Math
New OBBBA Schedule 1-A deductions reduce your 2026 taxable income, which directly lowers your 2026 tax liability. These are the four deductions that may apply:
Tips (IRC §224): Eligible workers in tipped occupations can deduct up to $25,000 of qualified tip income. Phases out above $150,000 MAGI (single) or $300,000 (joint).
Overtime premium pay (IRC §225): Non-exempt, hourly employees can deduct the premium portion of overtime wages, up to $12,500 (single) or $25,000 (joint return). Only the extra half of time-and-a-half counts, not the full overtime rate. Phases out above $150,000 MAGI (single) or $300,000 (joint).
Car loan interest: Deduct up to $10,000 in interest on a new, U.S.-assembled vehicle. Loan must originate after December 31, 2024. Phases out above $100,000 MAGI (single) or $200,000 (joint).
Senior bonus deduction: Taxpayers age 65 or older can deduct $6,000 each (up to $12,000 on a joint return where both spouses qualify). Phases out at 6% above $75,000 MAGI (single) or $150,000 (joint).
Because these are below-the-line deductions, they do not reduce your AGI or affect the 110% safe harbor threshold. But they do reduce your taxable income, which lowers the total 2026 tax that the 90% current-year method is calculated against.
Choosing the Right Method for Q2
If your 2026 deductions are similar to 2025, the prior-year method is usually easiest. Just pay one-quarter of your 2025 tax by June 16 and you are covered for Q2.
If you expect significant new deductions this year (tips, overtime, senior bonus, or car loan interest) or if your income dropped, run a quick estimate of your 2026 liability. If 90% of that estimate divided by four is less than one-quarter of your 2025 tax, the current-year method saves cash.
For freelancers and self-employed individuals, the annualized income installment method (Form 2210) provides an even more precise calculation if income is uneven across quarters.
How to Pay
Pay online using IRS Direct Pay at directpay.irs.gov or through EFTPS (Electronic Federal Tax Payment System). Select "Estimated Tax" and tax year 2026. Both options confirm payment instantly.
The Q2 due date is June 16, 2026. Payments received after that date begin accruing interest immediately. There is no grace period.
Run the Numbers Before June 16
If you received tips, earned overtime, turned 65, or financed a new American-built car in 2025 or 2026, the OBBBA deductions may reduce your 2026 tax bill enough to change which safe harbor costs less.
A quick mid-year tax projection takes about 30 minutes and can save months of overpaying. Contact TS CPA if you want help calculating your Q2 payment before the deadline.