How to Calculate Quarterly Federal Taxes
- 1). Determine your previous years' income and increase or decrease by any changes in salary or expenses throughout the year. The amount of income subtracted by above-the-line deductions is the adjusted gross income. Above-the-line deductions include items such as health savings account deductions, moving expenses, alimony paid and student loan interest deduction. A comprehensive list of above-the-line deductions is on Form 1040 Lines 23 through 35.
- 2). Choose whether or not you will itemize deductions. For estimation purposes, it is easier to use the standard deduction for the individual. Subtract the itemized or standard deduction from the adjusted gross income. The standard deduction for individuals or people married filing separately is $5,700. The standard deductions for married filing jointly and qualified widowers are $11,400; for head of households it is $8,350.
- 3). Calculate the number of exemptions a person may make. This is normally the same number as the previous year. Typically, exemptions are a spouse or dependents. Multiply the number of exemptions by $3,650 and deduct this from the adjusted gross income minus the standard deduction.
- 4). Multiply the number calculated in Step 3 by the proper tax rate. Form 1040ES has the tax rates on page 8.
- 5). Compute the alternative minimum tax on Form 6251 and any other miscellaneous taxes you may make during the year.
- 6). Determine the credits your may make. For calculating credits, refer to the previous year's Form 1040, Lines 47 through 53. Then subtract the credit from the alternative minimum tax and miscellaneous taxes.
- 7). Add the number calculated in Step 6 to any estimated self-employment taxes and then subtract any credits for earned income tax credit, making work pay tax credit, refundable education credits and refundable credits. This is the estimated current year's taxes. Divide the estimated current year's taxes by four to determine the quarterly payment.
Source...