Capital gains and Dividends

[AlexandriaB]

If I am living off of capital gains, dividends and interest from a taxable brokerage account do I have to pay estimated taxes during the quarter I receive the money or can the tax payments be spread out evenly over each quarter?

[NateTheGrEAt]

There are four quarterly due dates for estimated payments: April 15, June 15, September 15, January 15. If you choose to make one payment per quarter, it is timely as long as it is received on or before that date. You can also choose to make multiple payments, in which case all the payments you make between the previous payment date and the upcoming one count towards that quarter. 

For example, let's say you determined that you need to pay $2400 in estimated payments for the second quarter (due June 15). You could pay $2400 on June 15. That would satisfy your requirement. You could also pay $800 on April 20, $900 on May 3rd and $700 on May 27th. Those will give you a second quarter total of $2400. 

Just be sure to keep track of your payments as you will need to provide proof to the IRS in case there is a discrepancy between the amounts you report and the IRS' records. 

[AlexandriaB]

I'm sorry I had a typo in my question. I was trying to ask if I have to make estimated tax payments during the quarter I realize the capital gains or receive the dividends or can I evenly spread them out over the year.

[Mike9241]

There will be no federal penalties for not paying in enough taxes during the year if (assuming no withholding)

1) timely estimated tax payments equal or exceed 90% of your 2024 tax or

2) timely estimated tax payments equal or exceed 100% of your 2023 tax (110% if your 2023 adjusted gross income was more than $150K) or

3) your total taxes are less than $1,000

the lower of 1 or 2 is your required annual income tax payments. 1 is difficult to know until the year end so generally option 2 is the safer option. under the simplified method 25% of the estimate taxes must be paid in each quarter by 4/18, 6/15, 9/15 and 1/15/24. 

failing this and being subject to penalties you can use the annualized installment income method. 

this method requires knowing your income and deductions thru 3/31, then 5/31, then 8/31, and finally year end which should be the same as the tax return. the income is annualized. taxes are computed on the annualized income and then de- annualized. your tax payments for each period must equal or exceed these amounts to avoid penalties.

form 2210 page 3

https://www.irs.gov/pub/irs-pdf/f2210.pdf   

these are minimums. nothing prevents you from paying more than the minimums.