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Wisconsin Retirement Tax Friendliness

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Overview of Wisconsin Retirement Tax Friendliness

Wisconsin does not tax Social Security retirement benefits, even those taxed at the federal level. Income from retirement accounts, including an IRA or a 401(k), is taxable at rates ranging from 3.54% to 7.65%. Income from a government pension is not taxed under certain circumstances.

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You will pay of Wisconsin state taxes on your pre-tax income of
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Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
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    Jennifer Mansfield, CPA Tax

    Jennifer Mansfield, CPA, JD/LLM-Tax, is a Certified Public Accountant with more than 30 years of experience providing tax advice. SmartAsset’s tax expert has a degree in Accounting and Business/Management from the University of Wyoming, as well as both a Masters in Tax Laws and a Juris Doctorate from Georgetown University Law Center. Jennifer has mostly worked in public accounting firms, including Ernst & Young and Deloitte. She is passionate about helping provide people and businesses with valuable accounting and tax advice to allow them to prosper financially. Jennifer lives in Arizona and was recently named to the Greater Tucson Leadership Program.

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Wisconsin Retirement Taxes

Photo credit: ©iStock.com/omersukrugoksu

Wisconsin is the 21st-most populous state in the U.S., with a total population of about 5.8 million residents. It is located in the Great Lakes region of the Upper Midwest, along the western shores of Lake Michigan and Lake Superior.

Wisconsin’s retirement taxes are generally fairly low as compared with other states, although this will vary depending on your personal financial situation. As described in further detail below, the state fully exempts some types of retirement income, while taxing others.

Likewise, Wisconsin’s sales and property taxes are a mixed bag. While sales taxes are low, the state’s property taxes rank among the highest in the U.S.

A financial advisor in Wisconsin can help you plan for retirement and other financial goals. Financial advisors can also help with investing and financial plans, including taxes, homeownership, insurance and estate planning, to make sure you are preparing for the future.

Is Wisconsin tax-friendly for retirees?

Wisconsin is moderately tax-friendly for retirees. Your level of retirement taxes in Wisconsin will largely depend on two things: how you withdraw your income in retirement and whether you own a home.

If you do not own a home and you rely primarily on Social Security or income from a government pension, your retirement taxes will likely be very low. On the other hand, if you have significant income from a retirement account, like a 401(k), and you do own a home, your retirement taxes could be quite high.

Is Social Security taxable in Wisconsin?

Wisconsin does not tax Social Security retirement benefits, even those taxed at the federal level.

Are other forms of retirement income taxable in Wisconsin?

Income from retirement accounts, including an IRA or a 401(k), is taxable at rates ranging from 3.54% to 7.65% (the full Wisconsin income tax brackets are below). If you have income from a private employer pension, that income will also be taxable.

A portion of your retirement benefits from the Wisconsin Retirement System are subject to state income taxes. Any pre-tax contributions, like employee-required contributions, will be taxed at a state level. Contributions that you make with post-tax money are not taxable, though.

Income Tax Brackets

Single Filers
Wisconsin Taxable IncomeRate
$0 - $11,7903.54%
$11,790 - $23,9304.65%
$23,930 - $263,4806.27%
$263,480+7.65%
Married, Filing Jointly
Wisconsin Taxable IncomeRate
$0 - $15,9603.54%
$15,960 - $31,9104.65%
$31,910 - $351,3106.27%
$351,310+7.65%
Married, Filing Separately
Wisconsin Taxable IncomeRate
$0 - $7,9803.54%
$7,980 - $15,9604.65%
$15,960 - $175,6606.27%
$175,660+7.65%
Head of Household
Wisconsin Taxable IncomeRate
$0 - $11,7903.54%
$11,790 - $23,9304.65%
$23,930 - $263,4806.27%
$263,480+7.65%

Wisconsin also offers a retirement income exclusion. More specifically, taxpayers with income from an IRA or qualified retirement plan can subtract up to $5,000 of their retirement income when determining their state income tax. To qualify for this exclusion, you must be at least 65 years old and meet certain income requirements. For single filers and heads of household, their federal AGI must be less than $15,000. For married people filing jointly and separately, their combined federal AGI can be no more than $30,000.

How high are property taxes in Wisconsin?

Wisconsin has some of the highest property taxes of any state. The average effective rate in Wisconsin is 1.68%, which is the seventh-highest rate in the country. The typical homeowner in Wisconsin pays at least $3,300 in annual property taxes.

What is the Wisconsin Homestead Credit?

In Wisconsin, homeowners who use their property as a primary residence and who meet certain income requirements can claim a property tax credit on their income tax return. To be eligible, you must have household income no greater than $24,680.

The amount of the credit varies depending on your total property taxes paid that year and your household income. The maximum credit amount is $1,168.

How high are sales taxes in Wisconsin?

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Sales taxes in Wisconsin are very low. Beyond the state rate of 5%, counties can levy sales taxes of up to 0.50%. The overall average sales tax rate in Wisconsin is 5.43%. This is the eighth-lowest in the U.S.

For seniors, things gets even better. Wisconsin provides full sales tax exemptions for groceries and prescription drugs. Medical care and food are generally two of the largest expenses for retirees.

What other Wisconsin taxes should I be concerned about?

Wisconsin treats capital gains as regular income. If you have made an investment in the stock market, real estate or some other asset, it’s important to keep in mind that appreciation made by that investment will be taxed at a rate as high as 7.65%.

Wisconsin does not have an estate or inheritance tax.