Tool | September 2016

State-by-State Guide to Taxes on Retirees

Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state.

Wisconsin

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The Bottom Line
Map of Wisconsin

Mixed Tax Picture

The Badger State exempts Social Security benefits from its state income taxes, but it 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. In recent years, the state has dropped income tax rates; the low rate fell from 4.4% to 4.0% and the high rate fell from 7.75% to 7.65%. The tax reform also reduced the number of income tax brackets from five to four. Wisconsin's property taxes are high, but homeowners and renters may qualify for some property tax relief programs.

State Sales Tax

5% (exemptions include certain food and prescription drugs) plus any county or local sales tax. Most counties add 0.5%.

Income Tax Range

Low: 4.0% (on up to $11,090 of taxable income for singles or up to $14,790 for married couples)

High: 7.65% (on taxable income over $244,270 for singles or over $325,700 for married couples)

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 (those accounts that were in the system before 1964) qualify for a tax exemption. 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 (federal AGI must be less than $15,000 for single filers, $30,000 for married filers even if filing separately). Those age 65 or older at year-end are allowed an additional personal exemption of $700 and a deduction of $250.

IRAs

Qualifies for exemptions.

401(k)s and Other Defined-Contribution Employer Retirement Plans

Qualifies for exemptions.

Private Pensions

Qualifies for exemptions.

Public Pensions

Qualifies for exemptions. Certain Wisconsin state and local government retirees (those accounts that were in the system before 1964) qualify for a tax exemption. 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. Note, though, that if a pension is fully exempt, a taxpayer cannot also take the retirement exclusion.

Property Taxes

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 and renters, which is actually a credit against their Wisconsin income tax liability. Additionally, property tax relief for eligible taxpayers is provided through three credits that are subtracted directly from the property tax: the Lottery and Gaming Credit, the First Dollar Credit and the School Levy Tax Credit.

The Veterans and Surviving Spouses Property Tax 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."

Median property tax on Wisconsin's median home value of $163,000 is $3,202, according to the Tax Foundation.

Tax breaks for seniors: There are no special tax breaks for seniors, but the Wisconsin Housing and Economic Development Authority provides property-tax-deferral loans for the elderly with incomes under $20,000.

Inheritance and
Estate Taxes

There is no inheritance tax or estate tax.