I am looking for advice on how to avoid underpayment penalties on my 2025 taxes. I found the following safe harbor rules to avoid underpayment penalties on IRS.gov:
- Your filed tax return shows you owe less than $1,000 or
- You paid at least 90% of the tax shown on the return for the taxable year or 100% of the tax shown on the return for the prior year, whichever amount is less. If your adjusted gross income (AGI) for 2024 was more than $150,000 ($75,000 if your filing status for 2025 is married filing separately), substitute 110% for 100%.
Can someone please confirm I am interpreting these thresholds correctly under the following situation?
- Filing Married Jointly in 2025 with 2024 AGI over $150,000
- Owed $120,000 federal income taxes in 2024
- Estimated to owe $180,000 in 2025
- 2025 withholding will not result in a tax return showing less than $1,000 owed
If quarterly estimated payments and wage withholding throughout the 2025 total $132,000 or great, then no underpayment penalties will be charge because 110% of 2024’s taxes [$120k * 110% = $132k] are less than 90% of 2025’s taxes [$180k * 90% = $162k].
Thanks in advance.
