To calculate quarterly taxes as a small business owner, project your net business profit for the year, figure self-employment tax and federal income tax on that profit, subtract any credits and other withholding, and divide what’s left by four. You owe these payments for 2026 if you expect to end the year owing $1,000 or more after withholding and refundable credits.1Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax The IRS runs on a pay-as-you-go system, so quarterly estimates take the place of the withholding a W-2 employer would handle automatically.2Internal Revenue Service. Pay As You Go, So You Won’t Owe: A Guide to Withholding, Estimated Taxes and Ways to Avoid the Estimated Tax Penalty
Do You Actually Owe Quarterly Payments
Sole proprietors, partners in a partnership, and S corporation shareholders receiving a share of business income almost always need to make estimated payments. The trigger is expecting to owe $1,000 or more in federal tax for the year after withholding and refundable credits.1Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax That’s a low bar. A freelancer clearing $30,000 in net profit crosses it easily.
Estimated tax covers more than income tax. It also covers self-employment tax, which funds Social Security and Medicare.2Internal Revenue Service. Pay As You Go, So You Won’t Owe: A Guide to Withholding, Estimated Taxes and Ways to Avoid the Estimated Tax Penalty If you also work a W-2 job and its withholding is enough to cover your total liability, quarterly payments may not be necessary at all. The real question is whether withholding plus credits will leave you short by $1,000 or more at filing time.
What to Gather Before You Run the Numbers
Last year’s federal return is the best starting point. It shows your income pattern, deductions, and final liability, and it anchors the prior-year safe harbor discussed below. Add your current year-to-date income records: gross receipts, invoices, sales reports, anything showing revenue. Then pull records of deductible business expenses — supplies, software subscriptions, marketing, and health insurance premiums you pay for yourself.
Form 1040-ES walks the full calculation through a worksheet that asks for projected adjusted gross income, deductions, credits, and self-employment tax.3Internal Revenue Service. About Form 1040-ES, Estimated Tax for Individuals The 2026 version carries updated rate schedules and payment vouchers.4Internal Revenue Service. Form 1040-ES, Estimated Tax for Individuals
Work Out Your Net Business Income
Subtract expected business expenses from expected gross income for the year. Revenue of $120,000 against $30,000 in expenses leaves $90,000 in net profit. This number drives everything else. Be a little conservative — overestimating income slightly is far less painful than an underpayment penalty in April.
Calculate Self-Employment Tax
Self-employment tax covers both the employer and employee shares of Social Security and Medicare, combining to 15.3 percent. That’s 12.4 percent for Social Security on net earnings up to $184,500 in 2026, plus 2.9 percent for Medicare on all net earnings with no cap.5Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes)6Social Security Administration. What Is the Current Maximum Amount of Taxable Earnings for Social Security?
Before applying that 15.3 percent, reduce net earnings by 7.65 percent (multiply net profit by 92.35 percent). On $90,000 of net profit, the SE tax base is roughly $83,115, producing about $12,717 in self-employment tax.
One step small business owners often miss: half of your self-employment tax comes back as a deduction against adjusted gross income. Lower AGI means lower income tax.7Internal Revenue Service. Topic No. 554, Self-Employment Tax In this example, you’d subtract about $6,359 from the $90,000 when figuring income tax. Federal law treats this as a business expense even though it appears on your personal return.8Office of the Law Revision Counsel. 26 USC 164 – Taxes
Estimate Your Federal Income Tax
Take your AGI (net profit minus the half-SE-tax deduction, plus any other income) and subtract either the standard deduction or your itemized deductions. For 2026, the standard deduction is $16,100 for single filers, $32,200 for married couples filing jointly, and $24,150 for heads of household.9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill
What remains is taxable income, taxed at the 2026 marginal rates. Each bracket applies only to the income inside its range, not to all of it. Single filer brackets for 2026:
- 10 percent up to $12,400
- 12 percent from $12,401 to $50,400
- 22 percent from $50,401 to $105,700
- 24 percent from $105,701 to $201,775
- 32 percent from $201,776 to $256,225
- 35 percent from $256,226 to $640,600
- 37 percent above $640,600
Married couples filing jointly get wider brackets at each level, with 10 percent running to $24,800 and 37 percent kicking in above $768,700.9Internal Revenue Service. IRS Releases Tax Inflation Adjustments for Tax Year 2026, Including Amendments from the One, Big, Beautiful Bill
Apply the Qualified Business Income Deduction
Most sole proprietors, partners, and S corporation shareholders can deduct a percentage of qualified business income before calculating income tax. The One, Big, Beautiful Bill Act made the QBI deduction permanent starting in 2026 and raised it to 23 percent of qualified business income. On $90,000 of qualified income, that’s up to $20,700 off taxable income.
The deduction is capped at the lesser of your QBI component or 23 percent of taxable income minus net capital gains. Single filers and heads of household with taxable income below $201,750 get the full deduction with no additional restrictions; the joint threshold is $403,500. Above those levels, phase-outs based on wages paid and property held by the business kick in, extending to $276,750 for most filers and $553,500 for joint filers. Factor this deduction into your worksheet. Skipping it means overpaying every quarter.
Combine, Then Divide by Four
Add estimated federal income tax to self-employment tax. Subtract credits you expect to claim, such as the child tax credit or earned income credit, and subtract any withholding from other sources like a spouse’s W-2. What’s left is your total estimated tax for the year. Divide by four.
Running the $90,000 example through as a single filer taking the standard deduction and the full QBI deduction: after the half-SE-tax deduction and standard deduction, taxable income lands near $67,500. After QBI and the bracket math, federal income tax comes in around $6,200. Add $12,717 in self-employment tax, and the yearly total is roughly $18,900. Each quarterly payment: about $4,725. Your own figure will move with your credits, deductions, and filing status.
Additional Medicare Tax at Higher Incomes
If your net self-employment income exceeds $200,000 (or $250,000 married filing jointly), you owe an extra 0.9 percent Medicare tax on the amount above that threshold.10Internal Revenue Service. Questions and Answers for the Additional Medicare Tax This is separate from the 2.9 percent Medicare portion of self-employment tax. A single filer with $300,000 in net earnings owes 0.9 percent on the $100,000 above the threshold, adding $900. Build it into your estimate if your income is anywhere near these levels.
The Prior-Year Safe Harbor Shortcut
If projecting the current year feels shaky, the safe harbor rule offers a cleaner path. You avoid an underpayment penalty when your payments during the year cover at least the lesser of 90 percent of the current year’s tax or 100 percent of last year’s tax. If your prior-year AGI exceeded $150,000 ($75,000 for married filing separately), the second threshold rises to 110 percent of last year’s tax.1Office of the Law Revision Counsel. 26 USC 6654 – Failure by Individual to Pay Estimated Income Tax
For a business with unpredictable income, this is often the safest approach: take last year’s total tax, apply the 100 or 110 percent multiplier, divide by four, and pay that amount each quarter. No forecasting required. If you underestimate this year’s tax, you’ll owe the difference in April, but there’s no penalty.
When Even Quarters Don’t Fit Your Income
Splitting an annual estimate into four equal pieces assumes even income across the year. That doesn’t work for seasonal or lumpy businesses. A landscaper who earns most revenue May through October ends up overpaying in slow quarters and squeezing cash flow.
The annualized income installment method lets each payment reflect income actually earned in that period. You calculate tax on cumulative year-to-date income for each installment: January through March for the first, January through May for the second, January through August for the third, and the full year for the fourth.11Internal Revenue Service. 2025 Instructions for Form 2210 To use it, file Schedule AI with Form 2210 at year-end. If you use it for any period, you must use it for all four. The cost is more recordkeeping. The benefit is payments that match your real cash flow.
Payment Deadlines
The four periods don’t split the year evenly:
- Period 1 (January 1 through March 31): payment due April 15
- Period 2 (April 1 through May 31): payment due June 15
- Period 3 (June 1 through August 31): payment due September 15
- Period 4 (September 1 through December 31): payment due January 15 of the following year
When a due date lands on a weekend or federal holiday, it shifts to the next business day. Payments count as timely if postmarked or submitted electronically by midnight on the deadline.12Internal Revenue Service. Individuals 2 – When Are Quarterly Estimated Tax Payments Due?
How to Send the Payments
IRS Direct Pay draws from your bank account for free and returns an immediate confirmation, with no registration required.13Internal Revenue Service. Direct Pay with Bank Account EFTPS is also free and bank-based but requires enrollment; in exchange, you can schedule payments up to 365 days out and pull 15 months of payment history, which makes it the better fit if you want to set all four payments in January.14Internal Revenue Service. EFTPS: The Electronic Federal Tax Payment System Credit and debit card payments go through authorized third-party processors that charge convenience fees, typically 1.75 to 1.85 percent for personal cards and up to 2.95 percent for business cards.15Internal Revenue Service. Pay Your Taxes by Debit or Credit Card or Digital Wallet You can also mail a check with the paper voucher from Form 1040-ES, writing your Social Security number and tax year on it. Whichever method you pick, keep the confirmation or postmark receipt.
Don’t Forget State Estimated Tax
Federal payments aren’t the whole obligation. Most states with an income tax require their own quarterly estimates, and thresholds range from as little as $100 to the federal $1,000. A few states have no income tax and no estimated payment at all. State deadlines often mirror the federal schedule, but not always, and state interest rates on underpayments vary. Check your state’s department of revenue site early in the year, because finding out about a state requirement at filing time means penalties that were easy to avoid.