SESKStuff Everyone Should Know
SESK: Stuff Everyone Should Know · sesk.info/biz-estimated-tax-safe-harbor

Paying at least what share of last year's tax generally avoids the estimated tax penalty?

100% of the tax on last year's return (or 90% of this year's, whichever is smaller).

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  1. 50% of last year's tax
  2. 75% of last year's tax
  3. 100% of last year's tax ✔

Why: Most taxpayers avoid the underpayment penalty if they pay at least 90% of this year's tax or 100% of last year's, whichever is smaller. Last year's return is a known number, so new owners often use it as a guide.

Huh, didn't know that: Special rules apply to farmers, fishermen and some higher income taxpayers, so check Publication 505.

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References

Answer: 100% of last year's tax. Most taxpayers avoid the underpayment penalty if they pay at least 90% of this year's tax or 100% of last year's, whichever is smaller. Last year's return is a known number, so new owners often use it as a guide.

  1. IRS: Estimated taxes www.irs.gov/businesses/small-businesses-self-employed/estimated-taxes
    paid at least 90% of the tax for the current year, or 100% of the tax shown on the return for the prior year
    Checked 2026-10-11.

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