Retirement and Taxes

[jimdebmt]

I am retiring at the end of this calendar year. I will have enough income through SS and pensions to be on the edge of the 12% tax liability. As a new retiree will I be required to pay quarterly estimated taxes starting in 2026?

[Chslade]

You're only required to pay quarterly estimated taxes if you expect to owe $1,000 or more in tax for 2026 and your withholding doesn't cover enough of that tax bill. 

[shirleyp4]

You may be required to make estimated tax payments if you have not had enough taxes withheld from your social security and pension income.

You must pay taxes as the income is earned throughout the year, either through tax withholding or quarterly estimated tax payments.  If you have not paid enough taxes when you file your tax return, you may be subject to a tax penalty for underpayment of taxes.

There are a couple of IRS rules to determine whether you are required to make quarterly estimated tax payments.

• Will you owe less than $1,000 in federal income tax for the year after subtracting total taxes paid and credits from the total amount of tax you estimate for the current year?
• Will your tax withholding be at least 90% of your total tax for the year or less than 100% of your total tax from your previous year's return?  (In the case where your adjusted gross income  from your previous year's return exceeds $150,000 ($75,000 if you are married filing separately), the 100% requirement increases to 110%).

You must make estimated tax payments if you answered no to all of the above questions.

Individuals who earn at least two-thirds of their income from farming or fishing are required to make an estimated payment of two-thirds of the current year total tax amount or 100% of the previous year’s tax. The estimated tax payment deadline is January 15 of the following year.  If the return is filed and total tax paid in full by March 1, there is no requirement to make an estimated tax payment.  

The IRS and TurboTax have calculators available to estimate your income, tax liability, total payments and recommended amount for estimated tax payments.

Estimated tax payment deadlines are generally:

• 1st Quarterly Estimated Tax Payment April 15
• 2nd Quarterly Estimated Tax Payment June 15
• 3rd Quarterly Estimated Tax Payment September 15
• 4th Quarterly Estimated Tax Payment January 15 of the following year

If the deadline falls on the weekend or a legal holiday, the deadline is the next day that is not a weekend or legal holiday.

@jimdebmt