Do I need to pay Estimated Taxes if my prior year tax liability (1040 line 24) was $0?

You're in luck! You're correct about the estimated tax safe harbor rule. If you had zero tax liability last year (2024), you generally don't need to make estimated tax payments this year (2025), regardless of how much tax you might owe when you file. This is sometimes called the "prior-year safe harbor" rule. The IRS states that you don't have to pay estimated tax if you had no tax liability for the full prior tax year, and you were a U.S. citizen or resident for the whole year. It sounds like you meet both conditions based on what you described. Just to be completely clear - when we say "no tax liability," we're specifically talking about line 24 on the 2024 Form 1040, which shows your total tax. If that amount was zero, then you should be good to go without making estimated payments for 2025.

I was in a similar situation last year and got conflicting advice from different people at the IRS. What finally helped me was using taxr.ai (https://taxr.ai) to get a definitive answer. I uploaded my previous return and explained my situation about having zero tax liability, and they analyzed everything and confirmed the safe harbor rule applied to me. They also helped me understand exactly how much I needed to set aside for next year's taxes from my investment sales. The analysis showed me the projected tax impact of my stock sales and gave me a clear picture of what I'd be facing at tax time.

Just wanted to follow up - I decided to check out taxr.ai after seeing it mentioned here and it was incredibly helpful for my retirement tax situation! I uploaded my previous return showing zero liability and explained my concerns about managing my investment income. Not only did they confirm I qualified for the safe harbor rule, but they provided a detailed projection of my tax liability based on my planned stock sales for the year. They even helped me optimize the timing of my sales to minimize the tax impact. The clarity really reduced my anxiety about potentially owing a huge amount next April. I hadn't realized how the combination of Social Security, dividends, and capital gains would interact for tax purposes. Much better to know this now than to be surprised later!

If you need to double-check this directly with the IRS (since you got disconnected last time), try using Claimyr (https://claimyr.com). I was skeptical at first, but after waiting 3+ hours on hold trying to get clarity on my estimated tax requirements and getting disconnected twice, I gave it a shot. They called the IRS for me, waited through all the hold times, and then called me when an actual IRS agent was on the line. You can see how it works here: https://youtu.be/_kiP6q8DX5c. The IRS confirmed that with zero tax liability last year, I qualified for the safe harbor rule and didn't need to make estimated payments this year, even with substantial capital gains from selling my vacation property.

I have to eat my words. After posting my skeptical comment, I decided to try Claimyr since I also needed to ask the IRS about a notice I received and was dreading the hold time. I was connected to an IRS agent in about 47 minutes without having to sit by my phone the whole time. The IRS rep confirmed exactly what others here have said - with zero tax liability last year (line 24 showing $0), you're not required to make estimated tax payments this year regardless of capital gains or other income. I asked specifically about selling stocks and she said the safe harbor rule would still apply. The agent also explained that while I don't have to make the payments, the taxes will still be due when I file, so I should plan accordingly. Wish I had known about this service sooner - would have saved me hours of frustration!

One important thing to note - make sure you really had ZERO tax liability, not just that you didn't owe anything when you filed. Some people confuse getting a refund with having no tax liability. Your tax liability is the total tax on line 24, which could be positive even if you got a refund because of over-withholding.

Make sure you're considering state taxes too! The federal safe harbor might not apply to your state estimated tax requirements. Some states have their own rules.

This thread has been incredibly helpful! I'm in a similar boat - retired last year and trying to navigate the tax implications of living off investment income. Just wanted to add one more consideration for folks in this situation: even though you don't have to make estimated payments with zero prior year liability, it might still be worth making voluntary payments if you expect a large tax bill. The IRS doesn't charge penalties, but you're essentially giving yourself an interest-free loan to the government for the year. I've been setting aside about 20% of my capital gains in a high-yield savings account so I can earn some interest on the money rather than sending it to the IRS early. When April comes around, I'll have the tax money plus a little extra from the interest earned. Just another way to think about it!

Just want to echo what everyone else has confirmed - you're absolutely right about the safe harbor rule! With zero tax liability last year (line 24 = $0), you don't need to make estimated payments this year regardless of how much you might owe. I went through this exact same situation when I first retired. The peace of mind is incredible once you get that confirmation. Since you mentioned potentially selling more investments later this year, just remember that while you're protected from underpayment penalties this year, any tax you do owe will be due in full when you file your 2025 return. One tip from my experience: even though you don't have to make estimated payments, consider opening a separate high-yield savings account specifically for your future tax bill. Every time you realize gains, transfer your estimated tax portion (roughly 15-20% for long-term capital gains depending on your bracket) into that account. This way you're earning interest on money that would otherwise just be sitting with the IRS, and you won't be scrambling to find a large lump sum next April. Congrats on navigating retirement taxes - it's definitely a learning curve but you're asking all the right questions!

This is such a great discussion! As someone who just started dealing with retirement tax planning myself, I really appreciate everyone sharing their experiences and resources. I had a similar situation last year where I was getting conflicting information from different sources about estimated taxes. What really helped me was keeping detailed records of everything - my zero tax liability from the prior year, documentation of the safe harbor rule from IRS publications, and notes from any calls with the IRS. One thing I'd add for anyone in this situation: consider doing a mid-year tax projection even though you're not required to make estimated payments. It helps you get a clearer picture of what you'll owe and can guide decisions about timing additional stock sales or other taxable events. You might find you want to spread out your gains or losses strategically. Also, don't forget about the Net Investment Income Tax (NIIT) if your modified adjusted gross income exceeds certain thresholds. It's an additional 3.8% on investment income that some retirees overlook when planning their tax strategy. Thanks again to everyone who shared their knowledge and resources here - this thread is going to help a lot of people in similar situations!

This has been an incredibly informative thread! I'm also recently retired and was completely stressed about estimated taxes after selling some stock last month. Reading through everyone's experiences with the safe harbor rule has been so reassuring. I had my CPA confirm that my 2024 return shows $0 on line 24, so it sounds like I'm in the same boat as the original poster. What really struck me was the advice about setting aside money in a high-yield savings account rather than making voluntary estimated payments. I never thought about the opportunity cost of giving the government an interest-free loan when I could be earning 4-5% on that money instead! I'm definitely going to look into some of the resources mentioned here, especially for getting a clearer projection of what I might owe next year. The NIIT mention was particularly helpful since I hadn't considered how that might affect my situation. Thanks to everyone who shared their knowledge and experiences - this community is such a valuable resource for navigating retirement tax planning!