How do I calculate my AGI for estimated tax payments?

You're asking some really good questions about estimated taxes and AGI calculations! When you're self-employed with variable income, it can definitely be confusing. For AGI calculation, you start with your gross income (all the money you earn), then subtract certain adjustments. For self-employment, this includes: - Business expenses (yes, your software and computer count!) - Self-employment tax deduction (50% of what you pay) - Retirement contributions (SEP IRA, Solo 401k, etc.) - Health insurance premiums (if you're paying your own) For estimated tax payments, the IRS wants you to pay either 90% of your current year tax or 100% of last year's tax (110% if your AGI was over $150,000). Using last year's tax is often easiest if you had similar income. For variable income, try this approach: Keep track of your actual income and expenses each quarter, calculate the tax on year-to-date earnings, subtract what you've already paid, and pay the difference. The IRS Form 1040-ES worksheet can help you work through this.

I was in a similar situation last year when I started my consulting business! After trying to figure it out myself and making some mistakes, I found this tool called taxr.ai (https://taxr.ai) that really helped me understand my estimated tax situation. You upload your income documents or just enter your information, and it calculates everything including your proper AGI and estimated tax payments based on your actual income patterns. It was especially helpful for me with variable income because it lets you project different scenarios and adjusts the quarterly payments accordingly. The best part for me was that it explained WHY certain things affected my AGI differently than others. Like, I didn't realize my home office deduction worked differently than my software subscriptions when calculating AGI vs taxable income.

Just wanted to follow up about taxr.ai - I tried it out and it's been a game-changer for my variable income situation! I uploaded my last few months of income and it projected my AGI much more accurately than the flat estimates I was trying to use before. The quarterly payment calculations adjust as I add new income, and it flagged some deductions I was categorizing incorrectly that would have messed up my AGI calculations. It showed me that I was overpaying my first two quarters and could adjust my next payments accordingly. Seriously wish I'd found this earlier instead of stressing about spreadsheets and calculations!

If you're having trouble getting answers about AGI calculations for estimated taxes, try Claimyr (https://claimyr.com). I spent HOURS on hold with the IRS trying to get clarification on how to handle my contractor income alongside my W-2, and finally gave up. With Claimyr, they got me connected to an actual IRS agent in about 15 minutes who walked me through exactly how to calculate my AGI properly with mixed income types. You can see how it works here: https://youtu.be/_kiP6q8DX5c Before using this, I was on hold for literally 2+ hours and then got disconnected. The IRS agent I spoke to through Claimyr explained some nuances about self-employment deductions that affect AGI that I hadn't found anywhere online.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it since I was desperate for help with my AGI calculation for my side business. I got connected to an IRS representative in about 20 minutes when my previous attempts had me waiting for over 3 hours before giving up. The agent clarified exactly how to handle my specific situation with calculating AGI when transitioning from W-2 to mixed income. He explained which business expenses affect AGI directly versus which ones are itemized deductions. Saved me from a major error in my quarterly payments calculation. I hate admitting when I'm wrong but in this case it was absolutely worth it!

Pro tip for AGI calculation with variable income: keep a rolling spreadsheet! I'm a freelancer too, and I track my income and expenses weekly, then do a monthly calculation of my estimated AGI. This way I can adjust my quarterly payments based on actual data. For software and equipment like your computer, remember those are depreciated over multiple years (except with Section 179 which lets you deduct the full amount in year 1 if you qualify). This affects your AGI differently than regular business expenses. Also don't forget about QBI (Qualified Business Income) deduction - that's 20% of your net business income which reduces your taxable income (though not your AGI directly).

Has anyone used TurboTax Self-Employed for estimated taxes? Their website says it can help calculate quarterly payments but I'm not sure if it's worth paying for the full year just to figure out my AGI for estimated taxes.

Great thread! As someone who made the same transition from W-2 to freelance last year, I can share what worked for me. The key thing I learned is that AGI calculation for estimated taxes is actually pretty straightforward once you break it down: Your AGI = Total Income - Business Expenses - Self-Employment Tax Deduction - Other Above-the-Line Deductions For variable income, I use what I call the "true-up method" each quarter: 1. Calculate my actual year-to-date AGI based on real numbers 2. Project what my full-year AGI will be based on current trends 3. Calculate the tax on that projection 4. Subtract what I've already paid in estimates 5. Pay 25% of the remaining balance (since there are 4 quarters) This keeps me from overpaying early in the year when income is low or underpaying when I have a good month. The IRS doesn't care if your payments are uneven as long as you hit the safe harbor amounts by year-end. Also, don't forget that as a freelancer, you can deduct things like your home office, business phone, professional development, and even some meals if they're business-related. These all reduce your AGI and lower your estimated tax burden.