The estimated tax safe harbor: the 100% vs. 110% rule, federal and California
Updated November 1, 2026. Written for California owners, workers and freelancers; not legal or tax advice.
Freelance income is hard to predict. The safe-harbor rules let you avoid penalties by paying a number you already know: last year's tax.
Federal rule
You won't owe an underpayment penalty if your 2026 withholding plus on-time estimated payments are at least the smaller of:
- 90% of your 2026 total tax, or
- 100% of your 2025 total tax (the return must have covered 12 months)
If your 2025 AGI was more than $150,000 ($75,000 married filing separately), option 2 becomes 110%. You also owe no penalty if you owe less than $1,000 after withholding and credits.
“Total tax” includes self-employment tax, not just income tax. For 2025 it's line 24 of Form 1040.
California rule
California follows the same idea, with differences that catch people out:
| Federal | California | |
|---|---|---|
| Current-year option | 90% | 90% |
| Prior-year option | 100% / 110% over $150k AGI | 100% / 110% over $150k CA AGI ($75k MFS) |
| Very high income | 110% still available | No prior-year option if 2026 CA AGI is $1,000,000+ ($500,000 MFS); must pay 90% of current year |
| Minimum to require estimates | $1,000 owed | $500 owed ($250 MFS) |
| Payment schedule | 25% each quarter | 30% / 40% / 0% / 30% |
Example: 110%
A married couple filing jointly had 2025 AGI of $240,000 and total 2025 tax of $40,000. In 2026 one spouse's freelance profit grows to $250,000, so total 2026 tax is expected to be about $54,700.
- 90% of 2026 tax: about $49,255
- 110% of 2025 tax: $44,000, which is lower, so that's the target
- Federal per quarter: $11,000
They'll owe roughly $10,700 more in April 2027, but with no underpayment penalty. If their 2025 tax had been $50,000, 110% would be $55,000, and the 90%-of-current option ($49,255) would be the lower target.
When the current-year option is better
If your income is dropping, 90% of this year's tax may be smaller than last year's tax. The risk is that you guess too low. Recheck every quarter.
Uneven income?
If most of your income came late in the year, the annualized income installment method (Form 2210 Schedule AI, FTB Form 5805 for California) can lower or remove a penalty for earlier quarters. It takes more paperwork. A preparer can help.
See your safe-harbor number in the free calculator →
The Freelancer Quarterly Tax Workbook estimates both safe-harbor targets side by side and shows the lower one.