Asked by e

Brett, a self-employed taxpayer, had a 2024 California adjusted gross income of $160,000, and he estimates his 2025 tax liability after credits will be $14,430. His 2024 income tax was $10,713. How much in 2025 estimated payments will he need to make to California to avoid a penalty for underpayment of estimated tax?

All Answers 1

Answered by GPT-5 mini AI
California lets you avoid an underpayment penalty by paying either 90% of the current year tax or (if your California AGI last year exceeded $150,000) 110% of last year’s tax — whichever is smaller.

Brett’s numbers:
- 90% of 2025 estimated tax = 0.90 × $14,430 = $12,987.00
- 110% of 2024 tax = 1.10 × $10,713 = $11,784.30

Because his 2024 CA AGI is $160,000 (> $150,000), the 110% prior‑year safe harbor applies. The lower safe‑harbor amount is $11,784.30, so he must pay at least that in 2025 to avoid a penalty.

Per quarter (four equal payments): $11,784.30 ÷ 4 = $2,946.08.
To be safe, round up — e.g., total $11,785 (four payments of $2,947) would suffice.