WISCONSIN
Return to Retiree Tax Map
NICKNAME
The Badger State
BOTTOM LINE: MIXED TAX PICTURE
Wisconsin exempts Social Security benefits from its state income taxes, but taxes the rest of your pension and annuity income the same way the federal government does. The state does offer some retirement-income exemptions, especially for low-income residents. Wisconsin's sales tax is reasonable. Wisconsin is one of the ten states with the highest net real estate taxes, but some homeowners may qualify for a school property-tax credit against their state income tax.
STATE SALES TAX
5% (food and prescription drugs are exempt). Most counties add 0.5%.
INCOME-TAX RANGE
Low: 4.6% (on up to $10,570 of taxable income for singles, up to $14,090 for married couples)
High: 7.75% (on taxable income over $232,660 for singles, over $310,210 for married couples)
SOCIAL SECURITY
Social Security benefits are not taxed.
EXEMPTIONS FOR OTHER RETIREMENT INCOME
Generally, the same amount of your pension and annuity income that is taxable for federal tax purposes is taxable by Wisconsin. As with Social Security benefits, Railroad Retirement benefits are not taxed. Certain Wisconsin state and local government retirees qualify for a tax exemption, but out-of-state government pensions are fully taxed. All retirement payments from the U.S. military employee retirement system, the Coast Guard, the commissioned corps of the National Oceanic and Atmospheric Administration, and the Public Health Service are exempt. Retired people whose income is less than $10,000 ($19,000 if married filing a joint return) are also eligible for a "working families tax credit." This credit reduces or eliminates the Wisconsin income tax for people, including retirees, who are full-year residents of Wisconsin. You don't have to be employed or have more than one person in your household to claim this credit. Retirees 65 and older can subtract $5,000 of qualified retirement income, including IRA distributions, from their Wisconsin taxable income -- subject to income restrictions.
Note: Wisconsin has clarified its guidance for taxpayers who elected to roll over a regular IRA to a Roth IRA in 2010 and pay taxes in two even installments on their 2011 and 2012 returns. In Wisconsin, taxpayers are required to pay Wisconsin the tax on the distribution for each of the two years, even if the taxpayer becomes a nonresident of Wisconsin during the two-year period.
PROPERTY TAXES
According to a study by the Lincoln Institute of Land Policy and the Minnesota Taxpayers Association, Wisconsin’s net real estate tax is in the top ten states with the highest property tax. But homeowners and renters whose household income is less than $24,680 can benefit from the homestead credit program, which is designed to soften the impact of property taxes on low-income residents. The credit is based on the relationship of household income to the amount of allowable property taxes or rent for the calendar year. Wisconsin also offers a school property-tax credit to homeowners, which is actually a credit against Wisconsin income tax liability. Wisconsin homeowners may also qualify for the Lottery and Gaming Credit or the First Dollar Credit for making improvements to their property; the credits are subtracted directly from the property-tax bill.
Tax breaks for seniors: There are no special breaks for seniors, but some seniors might qualify for the Veterans and Surviving Spouses Property Tax Credit. The credit is equal to the amount of property taxes paid during the year on an eligible veteran's or surviving spouse's principal dwelling. To qualify for the credit, a veteran must have either a service-connected disability rating of 100% or a 100% disability rating based on "individual unemployability."
INHERITANCE AND ESTATE TAXES
There is no inheritance tax and currently no estate tax. But on January 1, 2013, provisions keeping estate tax at bay for 2011 and 2012 will expire and federal or state legislative action will be necessary to eliminate Wisconsin estate tax for 2013.
Visit RetirementLiving.com for a complete rundown of taxes in Wisconsin.
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