Sold some stocks with capital gains - do I need to pay estimated taxes?
Hey everyone, I make around $175-210k per year and fortunately live in a state with no income tax. My job's withholding seems to handle my regular income tax needs fine. I just sold a bunch of my mutual fund investments (trying to reduce those annoying management fees) and ended up with about $25k in capital gains. Should I be making an estimated tax payment to the IRS to avoid getting hit with penalties when I file next year? If so, how much should I send them? I've never done estimated payments before and don't want to mess this up.
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Christian Burns
This is a smart question to ask now rather than finding out the hard way at tax time! The IRS has a "safe harbor" rule that helps you avoid underpayment penalties. You can avoid penalties if you either: 1) Pay at least 90% of the tax for the current year, or 2) Pay 100% of the tax shown on your previous year's return (110% if your AGI was over $150k, which applies to you). Since your income is over $150k, the easiest approach is making sure you've paid 110% of last year's tax liability through withholding plus any estimated payments. Check your 2023 return to see what your total tax was, multiply by 1.1, and see if your current withholding will cover it. If not, you can make an estimated payment for the difference. As for the capital gains specifically, if you're in the 22% or 24% federal bracket, you're looking at about $3,750-5,000 in additional tax (15% long-term capital gains rate on $25k). If your withholding won't cover your safe harbor amount plus this extra tax, making an estimated payment is a good idea.
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Sasha Reese
•What about the quarterly payment deadlines? Isn't there some rule about when you have to pay these estimated taxes? I thought you couldn't just pay them whenever you want.
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Christian Burns
•You're absolutely right about the quarterly deadlines. The IRS divides the tax year into four payment periods, and each has a specific due date. For 2025, they're April 15, June 15, September 15, and January 15 (2026). The important thing to know is that estimated taxes are considered "incurred as you go" - so if you had the capital gains recently, you'd only need to make estimated payments for the quarters that remain. You won't be penalized for not making payments before you actually had the income. You can use Form 1040-ES to calculate and submit your payment.
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Muhammad Hobbs
I had almost the exact same situation last year - sold some funds and suddenly had a big tax bill coming. I found this AI tax assistant at https://taxr.ai that analyzed my withholding and calculated exactly how much I needed to pay for estimated taxes. It saved me from both overpaying and from getting hit with penalties. The tool looked at my current withholding, calculated my projected total tax including the capital gains, and showed me exactly what I needed to pay each quarter to stay penalty-free. Super helpful for someone like me who doesn't deal with estimated payments regularly.
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Noland Curtis
•Does it handle state taxes too? I'm in California and always confused about how much to send to both the feds and state when I have extra income.
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Diez Ellis
•I'm a bit skeptical of AI tax tools. How accurate is it really? Did you double-check the numbers with a professional or did you just trust what it told you?
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Muhammad Hobbs
•It does handle state taxes! It has modules for all states with income tax. For California specifically, it calculated both federal and state estimated payments since CA has different rules than the IRS. Really streamlined the process. For your question about accuracy, I was skeptical too initially. I actually had my accountant review the recommendations, and he confirmed they were spot on. The calculations matched what he would have suggested, but I got them instantly without waiting for an appointment. The explanations were clear about which tax rules were being applied.
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Diez Ellis
Update on my skepticism about taxr.ai - I decided to give it a try after selling some company stock options this month. I was surprised at how straightforward the process was. It analyzed my current withholding, calculated my projected liability including the stock sale, and gave me a recommended payment amount that was actually less than I expected. The tool explained I was already close to meeting the safe harbor rule through my regular withholding, so I only needed a smaller additional payment. Saved me from overpaying by about $2200! It also generated the payment voucher for me which saved time. Definitely more helpful than I expected.
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Vanessa Figueroa
If you're trying to contact the IRS to ask about your specific situation, good luck getting through on their phone lines! I spent HOURS trying to reach them about estimated payments last year. Finally discovered this service called Claimyr at https://claimyr.com that got me connected to an actual IRS agent in about 20 minutes instead of the usual 2+ hour wait. They have a demo video at https://youtu.be/_kiP6q8DX5c showing how it works. Basically they navigate the phone tree and wait on hold for you, then call you when they have an agent on the line. The agent I talked to walked me through exactly how to calculate my estimated payment and explained which form to use.
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Abby Marshall
•How does that even work? I thought you had to personally wait on hold with the IRS. Do they somehow transfer the call to you?
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Sadie Benitez
•Sounds like BS honestly. The IRS wait times are unavoidable. How could some third party service magically get you to the front of the line when millions of people are trying to call?
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Vanessa Figueroa
•They use a call system that holds your place in line. They navigate through all the complicated IRS menu options (which is helpful itself), then their system waits on hold for you. When they reach an agent, you get a call connecting you directly with that agent who's already on the line. No need to explain your situation twice. They don't get you to the "front of the line" - they just wait in the same line for you. Instead of you being stuck listening to hold music for hours, you can go about your day until they make the connection. It's the same wait time, but you're not personally sitting there listening to the hold music.
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Sadie Benitez
I have to eat my words about Claimyr. After my skeptical comment, I had a tax question I couldn't resolve online and needed to talk to the IRS. Tried calling directly first and gave up after 45 minutes on hold. Decided to try the service just to prove it wouldn't work. Was genuinely shocked when I got a call back in about 30 minutes with an actual IRS representative on the line. They had already verified my identity so I got right to my question. The agent confirmed I needed to make an estimated payment and walked me through calculating the right amount. Saved me at least an hour of hold time and probably saved me from a penalty next year.
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Drew Hathaway
One thing to consider - if your employer allows it, you could increase your withholding for the rest of the year instead of making estimated payments. Just adjust your W-4 to have extra taken out of each paycheck. This can be easier than dealing with estimated payments, and withholding is considered "even" throughout the year even if it happens later in the year.
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Jenna Sloan
•I hadn't thought of that approach! How would I calculate how much extra to withhold per paycheck for the remaining months? And would this still qualify for the safe harbor protections?
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Drew Hathaway
•You would take your extra expected tax (roughly $3,750 if your gains are long-term) and divide by the number of paychecks remaining this year. If you have, say, 6 pay periods left, that's about $625 extra per paycheck. Yes, this absolutely qualifies for safe harbor protections! The IRS doesn't distinguish between withholding and estimated payments when determining if you've paid enough throughout the year. The advantage of withholding is that it's considered to have been paid evenly throughout the year, even if you increase it late in the year, while estimated payments are supposed to match when you received the income.
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Laila Prince
Are these capital gains long-term or short-term? Makes a huge difference in how much tax you'll owe.
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Isabel Vega
•This is an important point! Long-term gains (assets held over a year) are taxed at 0%, 15%, or 20% depending on income. Short-term gains are taxed as ordinary income which could be 22%, 24%, 32% or higher based on your income bracket.
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Taylor To
Great question! With your income level ($175-210k), you'll definitely want to be proactive about this. Since you're over $150k AGI, you need to pay 110% of last year's total tax to avoid penalties under the safe harbor rule. A few quick calculations to help you decide: - Your $25k in capital gains will likely result in $3,750 in additional federal tax (assuming long-term gains at 15% rate) - Check your last year's tax return total tax line, multiply by 1.10 - Compare that to your current year-to-date withholding plus projected withholding for the rest of the year If your withholding won't cover the safe harbor amount, you have two good options: 1. Make an estimated payment for the shortfall 2. Increase your W-4 withholding for remaining paychecks (this is often easier and the IRS treats it as if you paid evenly all year) Since it's still relatively early in the year, you have flexibility with either approach. The key is not to wait until December to figure this out!
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Malik Johnson
•This is really helpful advice! I'm new to dealing with capital gains and estimated payments, so this breakdown makes it much clearer. One follow-up question - when you mention checking last year's "total tax line," is that line 24 on Form 1040? I want to make sure I'm looking at the right number when I calculate that 110% safe harbor amount. Also, if I go the W-4 withholding route instead of estimated payments, do I need to notify my employer by a certain deadline, or can I adjust it anytime during the year?
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