Quarterly Estimated Taxes in 2026 — What You Actually Owe and When

If your income isn't fully covered by W-2 withholding — you're self-employed, an S-corp shareholder receiving K-1 distributions, or earning meaningful investment income — you owe quarterly estimated taxes on four dates in 2026: April 15, June 15, September 15, and January 15, 2027. California uses those same four calendar dates. The floor to avoid the underpayment penalty is either 90% of your actual 2026 tax liability or — for most HNW filers — 110% of your 2025 tax, divided into four installments. Here's how the math works for both federal and California, and where OBBBA changed the starting number.

Who's on the hook — and who thinks they're not

Under § 6654, you're required to make estimated federal tax payments if you expect to owe $1,000 or more after accounting for withholding and credits. That captures:

• Self-employed individuals and sole proprietors — income tax plus 15.3% self-employment tax on net self-employment income up to the Social Security wage base
• S-corp shareholders receiving distributions beyond their W-2 wages — K-1 income carries no withholding; the income tax doesn't disappear just because the payroll tax does
• Partners and LLC members — same structure; K-1 income is unwithheld regardless of entity type
• Investors with significant capital gains, dividends, or rental income outside of tax-deferred accounts

The trap we see most often: a W-2 employee who also receives a K-1 from a side partnership, advisory board engagement, or family LLC. The W-2 withholding looks sufficient at a glance. It isn't — because it only covers the W-2 wages. The K-1 income stacks on top, and by year-end there's an underpayment penalty that could have been avoided with one quarterly payment.

California's threshold is slightly lower: estimated payments are required once you expect to owe $500 or more in California income tax ($250 if married/RDP filing separately).

The safe harbor math — federal and California side by side

The IRS provides two paths to penalty-free estimated tax under § 6654. Pay the lesser of:

1. 90% of your 2026 actual tax liability, or
2. 100% of your 2025 tax if your 2025 adjusted gross income was $150,000 or below — or 110% of your 2025 tax if your 2025 AGI exceeded $150,000

For most HNW filers, the prior-year method is the planning anchor — you know the 2025 number exactly. The calculation is straightforward: 110% × 2025 federal tax ÷ 4 = quarterly installment. Pay that on time, every quarter, and the underpayment penalty cannot attach regardless of what your 2026 income turns out to be.

Example: 2025 federal tax liability of $180,000. Safe harbor = $180,000 × 1.10 = $198,000. Divided by four: $49,500 per quarter.

California mirrors the federal structure more closely than most people realize. California also applies the 110% prior-year test — at the same CA AGI threshold of $150,000 ($75,000 if married/RDP filing separately). If your 2025 California AGI exceeded that threshold, your California safe harbor is the lesser of 90% of 2026 California tax or 110% of 2025 California tax. Form 540-ES is the payment vehicle.

There is one additional California rule for ultra-high earners: if your 2026 California AGI reaches $1,000,000 or more ($500,000 if MFS), the prior-year safe harbor disappears entirely. At that threshold, you must pay at least 90% of your actual 2026 California tax — which requires a current-year projection rather than a backward-looking calculation.

What we do about it: For every client above $150,000 in prior-year AGI, we run the 110% calculation off the signed return before April 15. For clients approaching the $1 million California threshold, we build a current-year projection rather than relying on prior-year math.

California's payment schedule isn't four equal installments

This is where taxpayers using federal payment logic get tripped up. Federal estimated payments are four equal 25% installments. California is not.

California's 2026 schedule (Form 540-ES):

There is no California Q3 estimated tax payment. Seventy percent of the total California estimate is due by June 15. A taxpayer who owes $40,000 in California estimated tax and pays $10,000 per quarter — following federal payment logic — has underpaid California by $12,000 as of June 15 and will owe a California underpayment penalty regardless of whether total annual payments end up correct.

The cash-flow consequence: the real liquidity crunch for California filers is April through June — not spread evenly across the year.

OBBBA reset your 2026 safe harbor baseline

The One Big Beautiful Bill Act (Public Law 119-21, enacted July 4, 2025) made the § 199A qualified business income deduction permanent and modified the SALT cap to $40,000 for most filers, with phase-outs above certain income thresholds. Both changes affect 2025 taxable income — and therefore affect what 110% of 2025 tax looks like as a 2026 safe harbor anchor.

Two scenarios worth modeling:

If OBBBA's permanent § 199A deduction reduced your 2025 federal tax, your 2026 safe harbor number is lower than prior years suggested. That's a real planning opportunity — right-sizing quarterly payments downward rather than overpaying.

If the raised SALT cap benefited you in 2025, the same logic applies. A larger itemized deduction lowers 2025 taxable income, lowers 2025 tax, and lowers the 2026 safe harbor floor.

These aren't automatic green lights to cut payments. The 90%-of-2026-actual test always applies, and if your 2026 income is materially higher than 2025, the prior-year method alone may not protect you. But for clients whose income is roughly comparable year over year, OBBBA may have permanently right-sized the safe harbor downward. Overpaying quarterly estimated taxes is an interest-free loan to the government that shows up as a refund in April — and that's money that could have been earning something else in the meantime.

What we do about it: Every 2025 return we complete comes with a projected 2026 estimated payment schedule. If OBBBA moved the baseline, we update the quarterly number before Q2.

Getting both the federal and California quarterly numbers right — including recalibrating for what OBBBA did to your 2025 baseline — takes more than a rule of thumb. That's a conversation worth having.