Estimated Taxes on Crypto Gains: Who Has to Pay Quarterly and How to Avoid the Penalty

Last updated: October 18, 2026 · Reviewed by the CryptoTaxAI editorial team · 9 min read

A big crypto gain mid-year can mean an underpayment penalty in April even if you pay in full. Who must make estimated payments, the safe harbors, the four deadlines and a worked example.

The Short Answer

US income tax is pay-as-you-go. If you realize a large crypto gain during the year and nothing is withheld on it, you may owe an underpayment penalty when you file, even if you pay the full balance in April. The penalty is avoided if your payments during the year (withholding plus estimated payments) reach one of the safe harbors: at least 90 percent of this year’s tax, or 100 percent of last year’s tax (110 percent if last year’s adjusted gross income was over $150,000). Estimated payments are due in four instalments; the last one for a calendar year is January 15 of the following year, which means a December gain can still be covered on time.

Who Has to Pay Estimated Tax

You generally must make estimated payments if you expect to owe at least $1,000 when you file after subtracting withholding and credits, and your withholding and credits will be less than the smaller of the two safe-harbor amounts. Employees whose only income is a salary rarely need to, because withholding covers them. Crypto changes that: a realized gain has no withholding attached, so an employee who sells a large position in June can fall below the safe harbor without noticing until April. Self-employed people, who already make estimated payments, simply need to add the gain to the calculation.

The Safe Harbors

You avoid the underpayment penalty if, through timely payments across the year, you have paid the smaller of:

• 90 percent of the tax shown on this year’s return, or
• 100 percent of the tax shown on last year’s return (110 percent if last year’s adjusted gross income exceeded $150,000, or $75,000 if married filing separately).

The prior-year harbor is the one most people with a one-off crypto gain use, because it is a known number: pull last year’s total tax from the return, make sure this year’s withholding plus estimates reach that figure (or 110 percent of it), and the penalty is avoided regardless of how large this year’s gain is. The balance is then simply due in April. The penalty itself is computed per quarter on the shortfall at the federal short-term rate plus three percentage points, so timing matters: a payment in January does not cure a shortfall from June.

The Four Deadlines

Dates that fall on a weekend or holiday move to the next business day. The default method assumes income arrives evenly and expects a quarter of the year’s estimated tax at each date. If your gain arrived in one quarter, the annualized income instalment method (Schedule AI of Form 2210) lets you show that and pay the larger amount in the quarter it was earned, instead of being penalized for the earlier quarters when you had no gain.

Worked Example: A Gain in August

An employee with a salary that is fully covered by withholding sells coins in August 2026 for a $60,000 long-term gain and nothing else changes. Last year’s total tax was $14,000 and last year’s AGI was under $150,000. The withholding this year will again be about $14,000, which already meets the 100 percent prior-year safe harbor; no estimated payment is required, and the tax on the gain is simply paid with the return in April. The same person with last year’s AGI over $150,000 needs payments reaching $15,400 (110 percent); withholding of $14,000 leaves a $1,400 shortfall that should be paid by the September 15 instalment (or spread, using the annualized method). A self-employed person with no withholding would instead compute the tax on the gain, add it to the September instalment, and document the timing on Schedule AI. The crypto tax calculator gives a federal estimate of the tax on the gain itself; the safe-harbor arithmetic uses last year’s return.

How to Pay

Estimated payments are made with Form 1040-ES vouchers or, more simply, online through IRS Direct Pay or an IRS Online Account, choosing “estimated tax” and the correct tax year. Keep the confirmation numbers; you will enter the total paid on next year’s return. States with income tax have their own estimated payment systems and deadlines, which this guide does not cover; check your state’s revenue department.

The Withholding Shortcut

Employees have an option the self-employed do not. Withholding is treated as paid evenly through the year regardless of when it actually happened, so increasing withholding on a W-4 for the last few paychecks of the year can cure an earlier-quarter shortfall in a way a late estimated payment cannot. If a gain in June has left you below the safe harbor, raising withholding for October to December by the shortfall is often the simplest fix. Change the W-4 back in January.

Mistakes We See

• Assuming that paying in full in April avoids the penalty. It does not; the penalty is for paying late during the year.
• Forgetting the January 15 deadline for fourth-quarter gains, including December loss-harvesting that nets to a gain.
• Using this year’s projected tax as the target when last year’s total tax is lower and already covered by withholding.
• Missing the 110 percent rule for higher incomes.
• Paying a lump sum in January for a gain realized in May without filing Schedule AI, and being penalized for the earlier quarters anyway.
• Ignoring state estimated taxes, which have their own penalties.

Sources

• IRS — Estimated Taxes
• IRS — About Form 1040-ES
• IRS — About Form 2210, Underpayment of Estimated Tax
• IRS — Topic 306, Penalty for Underpayment of Estimated Tax
• IRS — Direct Pay

Frequently asked questions

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• How to Report Crypto on Your Tax Return (2026): 8949, Schedule D — How to report crypto on your 2026 tax return: Form 8949, Schedule D, Form 1040, and the records the IRS expects, step by step.