Estimated tax on crypto gains: when to pay the IRS during the year and how to avoid the penalty

Selling crypto at a profit can create a tax bill long before April. The US tax system is pay-as-you-go: the IRS expects you to pay tax as you earn or receive income during the year. For wages, that happens through withholding. But crypto gains usually have no tax withheld, so a large gain can mean you need to make estimated tax payments, or face a penalty.

This guide explains who has to pay, the 2026 due dates, the safe harbors that protect you from the penalty, and what to do if you sell late in the year. For how crypto gains are taxed in the first place, see crypto tax in the US.

Why crypto gains can trigger estimated tax

The IRS says that if your withholding isn’t enough, or you receive income such as interest, dividends, self-employment income, capital gains, prizes or awards, you may have to make estimated tax payments. Crypto is treated as property, so selling or swapping it at a profit generally produces a capital gain. Income such as staking rewards counts too. See crypto staking taxes.

Estimated tax pays not only income tax but other taxes too, such as self-employment tax and the alternative minimum tax.

Who has to pay

Publication 505 sets out a general rule. In most cases, you must pay estimated tax for 2026 if both of these apply:

1. you expect to owe at least $1,000 in tax for 2026 after subtracting withholding and tax credits; and
2. you expect your withholding and credits to be less than the smaller of:
   • 90% of the tax on your 2026 return, or
   • 100% of the tax on your 2025 return, which must cover all 12 months.

Higher incomes. If your 2025 adjusted gross income was more than $150,000 ($75,000 if married filing separately in 2026), replace the 100% with 110%. Different rules apply if at least two-thirds of your income is from farming or fishing.

No tax last year. You don’t have to pay estimated tax for the current year if you had no tax liability for the prior year, you were a US citizen or resident for the whole year, and that prior year covered 12 months.

The 2026 due dates

The year is split into four payment periods:

If a due date falls on a weekend or legal holiday, a payment made the next business day is on time. Form 1040-ES adds that you don’t have to make the January payment if you file your 2026 return by 1 February 2027 and pay the entire balance due with it.

The safe harbors in practice

The 100% and 110% rules are useful because they’re based on a number you already know: last year’s tax.

An example. Your total tax for 2025 was $12,000 and your 2025 AGI was under $150,000. In 2026 you sell crypto at a large gain and expect your tax to be much higher. If your withholding and estimated payments for 2026 add up to at least $12,000, paid on time through the year, you’re generally protected from the underpayment penalty, even though you’ll owe the rest when you file. If your 2025 AGI had been over $150,000, the target would be $13,200 (110%).

The catch is timing. The IRS says taxpayers should generally pay estimated tax in four equal amounts, and the penalty is figured separately for each period. Paying everything in January doesn’t cover a shortfall for April.

Selling crypto in the middle of the year

Publication 505 gives an example that works just like a mid-year crypto sale:

• Early in 2026, you figure your estimated tax at $1,800 and pay $450 on 15 April and 15 June.
• On 10 July, you sell investment property at a gain. Your refigured estimated tax is $4,100.
• Your payment for the third period becomes $2,175, and if nothing else changes, the fourth payment is $1,025.

The IRS warns that if you later increase your payments like this, you may still owe a penalty for the earlier periods.

The annualized income installment method

Crypto gains are often lumpy: nothing for months, then a big sale. If you don’t receive income evenly through the year, the annualized income installment method may let you pay less for the early periods. It works out your tax as income builds up during the year, instead of dividing the whole year’s tax into four equal parts.

To use it, you complete the annualized worksheet in Publication 505 and file Form 2210 with Schedule AI with your return. If your big sale came in November or December, this can reduce or remove the penalty for the earlier periods.

The penalty

If you don’t pay enough by each due date, you may owe a penalty for underpayment of estimated tax, figured on Form 2210. Points to know:

• The IRS says most taxpayers avoid it if they owe less than $1,000 after withholding and refundable credits, or meet the 90% or 100% safe harbor.
• You can be charged a penalty even if you’re due a refund when you file.
• The IRS can waive the penalty if you didn’t pay because of a casualty, disaster or other unusual circumstance, or if you retired after reaching 62 or became disabled and the underpayment was due to reasonable cause.

For the separate penalties for not reporting crypto at all, see what happens if you don’t report crypto to the IRS.

How to pay

You can pay estimated tax online through the IRS, by phone, or by mail with a Form 1040-ES voucher. If you also have a job, the IRS says you can instead ask your employer to withhold more tax by filing a new Form W-4.

A checklist for crypto investors

1. After a big sale, refigure your estimated tax for the year.
2. Check the safe harbor: 100% of last year’s tax, or 110% if your 2025 AGI was over $150,000.
3. Pay by the next due date, not just at the end of the year.
4. Keep records of each sale, with dates and cost basis. Your broker’s Form 1099-DA can help. See Form 1099-DA explained.
5. Consider the annualized method if your gains came late in the year.