Estimated Tax Worksheet: Two questions about the 2026 calculation

[jsci123]

TurboTax Desktop 2025 — Estimated tax. I am using some round numbers.

Filing MFS, age 65+, no wages for 2026. Income is all investment (qualified dividends, LTCG, and ordinary dividends). Itemizing deductions (SALT, mortgage interest, charitable contributions).

Question 1: The "Deduction Allowed" line on the worksheet is less than the sum of my itemized deductions. When I changed my income entries, the Deduction Allowed amount changed too — so it seems income-sensitive. What limitation is TT applying to reduce itemized deductions below the Schedule A total?

Question 2: I selected "100% of estimated 2026 tax" as my payment method, but the quarterly voucher amounts × 4 are about $2,400 less than the total tax shown on that same screen. What is TT subtracting to arrive at the lower quarterly amount?

[jsci123 · Accepted solution]

Post 1: "Deduction Allowed" less than Itemized Deductions total

Resolved — OBBBA 0.5% AGI Charitable Contribution Floor

For anyone else seeing their "Deduction Allowed" come in lower than their Schedule A itemized total for 2026, the answer is the new charitable contribution floor under the One Big Beautiful Bill Act (OBBBA).

Starting in tax year 2026, charitable contributions are only deductible to the extent they exceed 0.5% of your AGI. So if your AGI is $200,000, the first $1,000 of charitable giving is non-deductible. This reduces your itemized deductions below the Schedule A line-item total, and the reduction is income-sensitive — change your AGI and the floor changes with it.

This is OBBBA §110012 if anyone wants to look it up. It works similarly to the medical expense 7.5% AGI floor, but applied to charitable contributions at 0.5%.

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Post 2: Quarterly vouchers ~$2,400 less than total estimated tax

Resolved — TurboTax carries forward 2025 withholding into 2026 voucher calculation

I figured out why my 1040-ES vouchers were about $2,400 less than my total estimated tax. On the "Estimated Tax Payment Options" form, there's a line that reads:

"Expected withholding for 2026 (2025 actual withholding)"

TurboTax auto-populated this with my 2025 federal withholding amount, even though I have no wages or withholding sources for 2026 (retired, all investment income). It subtracted that phantom withholding from the total tax before dividing into quarterly payments, making the vouchers too low.

Fix: In TurboTax Desktop Forms mode, right-click on that withholding field in the Est Tax Options worksheet and select "Override" to change it to $0. If you use the Step-by-Step interview, selecting the "Estimate" method instead of "W-4" and entering zero for pay period info may also zero it out, though results seem inconsistent per other threads on this topic.

Heads up to anyone newly retired or transitioning away from wage income — double-check this field or your quarterly payments may be significantly understated.