Estimated Tax

DEFINITION of 'Estimated Tax'

Periodic advance payment of taxes which are based upon the amount of income that is earned and the amount of estimated tax liability that will be incurred as a result. Estimated taxes are assessed on income that is not subject to any type of withholding, which includes self-employment income, dividend income, rental income, interest income and capital gains.

BREAKING DOWN 'Estimated Tax'

Estimated taxes are usually paid on a quarterly basis. If the estimated taxes that are paid do not equal at least 90% of the taxpayer's actual tax liability (or 100% or 110% of the taxpayer's prior-year liability, depending on the level of adjusted gross income), then interest and penalties are assessed against the delinquent amount.

RELATED TERMS
  1. Adjusted Gross Income - AGI

    A measure of income calculated from your gross income and used ...
  2. IRS Publication 505

    A document published by the Internal Revenue Service that outlines ...
  3. IRS Publication 509: Tax Calendars

    A document published by the Internal Revenue Service that provides ...
  4. Tax Refund

    A tax refund is a refund on taxes paid to an individual or household ...
  5. Income Tax

    A tax that governments impose on financial income generated by ...
  6. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
Related Articles
  1. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience – and all the tax benefits you're due.
  2. Taxes

    Small Business Tax Obligations: Payroll Taxes

    Don't leave it up to your accountant - owners are ultimately responsible for fulfilling tax obligations.
  3. Taxes

    Tax Deductions For Rental Property Owners

    Besides creating ongoing income and capital appreciation, real estate provides deductions that can reduce the income tax on your profits.
  4. Taxes

    3 Common Tax Questions Answered

    We clarify some rules that often puzzle taxpayers.
  5. Taxes

    Capital Gains Tax Cuts For Middle Income Investors

    Find out how TIPRA plans to slash taxes for those in the 10-15% tax bracket.
  6. Taxes

    Why People Renounce Their U.S Citizenship

    This year, the highest number of Americans ever took the irrevocable step of giving up their citizenship. Here's why.
  7. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  8. Taxes

    Confused About Estimated Tax Deadlines for 2016?

    If you run a business or have investment income, pay attention to this year's estimated tax deadlines. Here are the details, and what's new for 2016.
  9. Taxes

    Avoid the Social Security Tax Trap

    Government benefits can cost you big money! Know the income thresholds before you file.
  10. Taxes

    Tax-Saving Advice for IRA Holders

    Be informed about benefits and deductions that may apply to you and avoid costly mistakes on your return.
RELATED FAQS
  1. How do I avoid paying excess taxes on securities I have sold?

    If you dispose of securities during the tax year, the profit or losses from the transaction are either capital gains or ... Read Full Answer >>
  2. How do I file taxes for income from foreign sources?

    If you are a U.S. citizen or resident alien, your income (except for amounts exempt under federal law), including that which ... Read Full Answer >>
  3. How Long Should I Keep My Tax Records?

    The Internal Revenue Service (IRS) has some hard and fast rules regarding how long taxpayers should keep their tax records. As ... Read Full Answer >>
  4. Does the IRS charge interest on penalties?

    The Internal Revenue Service (IRS) charges interest on any overdue taxes owed, but it does not charge interest on penalties. ... Read Full Answer >>
  5. Are tax shelters legal in Canada?

    Most tax shelters are legal in Canada. However, there have been illegal tax shelter scams that the Canada Revenue Agency ... Read Full Answer >>
  6. Can the IRS garnish your tax refund?

    Federal law states that only state and federal agencies, such as the Internal Revenue Service (IRS), are allowed to garnish ... Read Full Answer >>
Hot Definitions
  1. Liquidation Margin

    Liquidation margin refers to the value of all of the equity positions in a margin account. If an investor or trader holds ...
  2. Black Swan

    An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult ...
  3. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  4. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  5. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
Trading Center