Whether you have to pay estimated taxes quarterly or not, it's good practice to get an idea of your state and local tax liability. Keeping tabs on how much you owe can help inform your financial planning practices for the year.
Items you will need
- Income and deduction-related information
- Retirement and health savings plan data
- Previous year's tax return
Figure the first page and a half of Internal Revenue Service Form 1040 to find the amount of your taxable income. If your tax-related circumstances have not changed much from the previous year, use your old return as a guide to your exemptions and deductions.
Get the state and local income tax rates from the relevant authorities. You may be able to find the rates online. If not, phone your local tax authorities.
Add your local and tax rates (as a percentage) and multiply your taxable income figure by the local and state tax rates, respectively. For instance, if local tax is 6 percent and state tax is 10 percent, you'd multiply your taxable income by 0.16 to find your yearly tax amount. Divide that figure by 4 if you need to arrive at a quarterly estimated tax amount.
- Your state may offer a worksheet with which you can figure your estimated taxes.
- There are often differences between federal and state deductions allowed.
- If you itemize deductions or have self-employment income, you may have to work through IRS schedules, such as Schedules A or C, to figure your taxable income.
- Tax laws are revised regularly. You may want to consult a tax accountant about changes that apply to your situation.
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