Wisconsin has no estate tax. The federal estate tax may apply to residents of the state, however, if their estate is valuable enough. This page is for Badger State residents who want to learn more about the estate tax as they prepare themselves and their families for what will happen after they’ve died. Of course, one of the best ways to plan your estate is to get professional assistance in the form of a financial advisor. SmartAsset can help you easily find an advisor with our free financial advisor matching service.
Wisconsin Estate Tax
Wisconsin does not levy an estate tax, making it one of 38 states without an estate tax.
What Is the Estate Tax?
The estate tax applies to the estate of a person who has recently died. Sometimes referred to as the “death tax,” the estate tax is levied before the assets in the estate are dispersed to a person’s legally designated heirs. The tax only applies to estates that surpass a legally determined threshold, which varies based on which government is levying the tax.
The estate tax is not the same as the inheritance tax. Inheritance taxes are levied on an estate’s assets after they are has passed on to a person’s heirs.
Wisconsin Inheritance and Gift Tax
Wisconsin also has no inheritance tax, but there is a possibility you’ll owe an inheritance tax in another state if you inherit money or property from someone living in that state. In Pennsylvania, for instance, the inheritance tax applies to all assets left by someone living in the state, even if the inheritor is out-of-state. If someone living in another state leaves you an inheritance, make sure you check local laws so you don’t end up missing a tax payment and having to deal with the consequences.
There is no gift tax in Wisconsin either. The federal gift tax has an annual exemption of $15,000 per gift recipient. If you give more than $15,000 to any one person in a year, you have to report the gift to the IRS. It counts against your lifetime gift tax exemption of $11.18 million, and it also reduces your federal estate tax exemption.
Federal Estate Tax
Though Wisconsin does not have an estate tax, the federal estate tax may apply if your estate is large enough. The federal estate tax has an exemption of $11.18 million in 2018, which will increase to $11.40 million in 2019. The exemption is portable, so one spouse can pass their exemption to the other. This means that, with the right legal maneuvers, a married couple can protect a total of $22.36 million when the second spouse dies.
If an estate exceeds the exemption, the federal government taxes it according to a series of brackets with ascending rates. The top rate is 40%.
Here is how it works: Let’s say you have $20 million in your estate and you are not married. Taking out the $11.18 million exemption, your taxable estate is $8.82 million, meaning you are in the top tax bracket. The base tax on the first $1 million is $345,800. Plus, you owe 40% on the remaining $7.82 million, which equals $3.128 million. Add in the base payment and your total estate tax bill comes to $3,473,800.
|FEDERAL ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the federal exemption of $11.18 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Wisconsin Tax Picture
Wisconsin is moderately tax-friendly for retirees. The state does not tax Social Security benefits, but a portion of income from public pensions is taxable. This includes pre-tax contributions, like employee-required contributions, but not personal contributions made with post-tax money. The state also fully taxes withdrawals from 401(k) plans and other retirement accounts, as well as any income from private pensions. Income tax rates in Wisconsin range from 4.00% to 7.65%.
Wisconsin has among the highest property tax rates in the nation. The average effective rate is 1.95%. Homeowners with total household incomes of less than $24,680 who own and occupy their homes are eligible for a property tax credit. The maximum credit is $1,168.
The average sales tax statewide in Wisconsin is 5.42%, which is the eighth lowest in the nation. The Wisconsin state rate is 5%, and counties can levy a sales tax of up to 1.75%.
Estate Planning Tips
- Estate planning can bring unexpected challenges, so it may make sense to get a professional to help you. SmartAsset has a free financial advisor matching service that can pair you with an advisor who is right for you and your situation. You answer a few questions about you and your finances. We then match you with up to three advisors, all fully vetted and free of disclosures. You talk to each advisor and see if one of them seems like a good fit for you.
- You’re never too young to start planning your estate. Even if you think you have years left, don’t make the estate planning mistake of waiting to get started. Should the unthinkable happen, you don’t want to leave your family in the lurch.
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