Safe harbor qualification with ITC

[Mikpi314]

I am trying to avoid an underpayment penalty.  In 2024 I am  not on track to pay, 90% of current year taxes due to some investment income.  However, I am on track to pay 110% of last year's taxes.  The thing is, last year my taxes were materially lower due to an investment tax credit for solar panel installation.  Am I allowed to count that tax credit in measuring last year's taxes for safe harbor qualification purposes? Or do I need to back out the  credit first? If I can't count the credit, I probably would not be on track to pay 110% of last year's taxes, and would need to make an estimated payment to avoid penalty.

[NCperson · Accepted solution]

The prior year is based on whatever is on Line 24 from your prior year tax return (so it is after the solar tax credit has been applied).  Take Line 24 and multiply by 110% (assuming your income exceeds $150,000) and divide by 4 - that is the minimum quarterly payment required (since you state that the current year is much higher than that).