rjs
Level 15
Level 15

Retirement tax questions

You can avoid the penalty for not paying estimated tax if your total 2022 withholding is more than your 2021 tax. If your 2021 AGI was more than $150,000 your total withholding has to be more than 110% of your 2021 tax.


Exactly what constitutes "your 2021 tax" is a somewhat involved calculation. It's not just one line on your 2021 tax return. The instructions for 2022 haven't been issued yet, but you can get a good idea by looking at the instructions for line 8 of the 2021 Form 2210, for calculating your 2020 tax. Those instructions reference the 2020 Form 1040 and schedules, so some of the line numbers will be different for the 2021 forms, and some of the details might change.


If you file as married filing jointly for either 2021 or 2022, but not for both years, additional rules apply. See the IRS Instructions for Form 2210.


Having enough withholding avoids the penalty for not paying estimated tax, but you still have to pay the full tax on all of your 2022 income. You will just have a big payment due when you file your 2022 tax return, instead of paying the additional tax during the year.


I am taking your word for it that your 2022 tax will be as high as you say it is, even after taking into consideration the exclusion of gain for selling your personal home.