Wisconsin does tax most pensions and retirement income, including distributions from private pensions, 401(k) and 403(b) plans, and traditional IRAs, at the same rates it applies to wages. The big exceptions are Social Security, railroad retirement, and military retirement, which are fully exempt, along with a handful of legacy government pensions. Starting with the 2025 tax year, retirees 67 and older can also subtract up to $24,000 of other retirement income from their Wisconsin return.
What Wisconsin Taxes and at What Rate
Wisconsin begins with your federal adjusted gross income. If a distribution is taxable federally, it is generally taxable in Wisconsin in the same amount.1Wisconsin Department of Revenue. Individual Income Tax – Retired Persons That sweeps in payments from private employer pensions, 401(k)s, 403(b)s, and traditional IRAs.
The state has four brackets, all of which can hit retirement income. Single filers pay 3.50% on the first $14,680 of taxable income, 4.40% up to $50,480, 5.30% up to $323,290, and 7.65% above that. Joint filers get wider bands: 3.50% up to $19,580, 4.40% up to $67,300, 5.30% up to $431,060, and 7.65% beyond.2Wisconsin Department of Revenue. DOR Tax Rates
Qualified Roth IRA and Roth 401(k) withdrawals are not taxed. Because they are tax-free federally, they stay tax-free in Wisconsin.3Wisconsin Department of Revenue. How Your Retirement Benefits Are Taxed
Social Security and Railroad Retirement
Social Security benefits and railroad retirement benefits are completely exempt from Wisconsin income tax.4Wisconsin Department of Revenue. Wisconsin Tax Information for Retirees Your other income does not matter, and no portion is pulled back in at higher income levels. That’s a real break compared to the federal return, where up to 85% of Social Security can be taxable.
Military and Uniformed Services Retirement
All U.S. military retirement pay is fully exempt from Wisconsin tax under Wis. Stat. 71.05(1)(am). The exemption covers Army, Navy, Air Force, Marines, Space Force, National Guard, and Reserve retirement.5Wisconsin State Legislature. Wisconsin Code 71.05 – Modifications to Adjusted Gross Income A parallel subsection, 71.05(1)(an), gives the same full exemption to retirement pay from the Coast Guard, the NOAA commissioned corps, and the Public Health Service commissioned corps.6Wisconsin Department of Revenue. Wisconsin Tax Information for Military Personnel and Veterans
There is no income cap, no age requirement, and no phase-out. The full amount comes off your Wisconsin return.
Legacy Government Pension Exemptions
Wisconsin fully exempts certain state, local, and federal pensions, but only for people who were already in the system by specific cutoff dates. If you joined later, the pension is taxed like any other distribution.
Payments from several Milwaukee-area retirement funds and the former Wisconsin State Teachers Retirement System are exempt if you were a member of the system on December 31, 1963, or retired from it before January 1, 1964. The funds covered include the Milwaukee City and County Employees’ Retirement Systems, the Milwaukee Police Officers’ Annuity and Benefit Fund, the Milwaukee Fire Fighters’ Annuity and Benefit Fund, the Milwaukee Sheriff’s Annuity and Benefit Fund, and the Milwaukee Public School Teachers’ Annuity and Retirement Fund.1Wisconsin Department of Revenue. Individual Income Tax – Retired Persons Current Wisconsin Retirement System participants who started work in the 1970s or later get no exemption under this provision.
Federal civil service retirement is fully exempt under Wis. Stat. 71.05(1)(a) if you were a member of the federal retirement system on December 31, 1983.6Wisconsin Department of Revenue. Wisconsin Tax Information for Military Personnel and Veterans Federal employees hired in 1984 or later, including everyone under FERS, do not qualify, and their pensions are fully taxable by Wisconsin.
Subtractions for Older Retirees
If your retirement income doesn’t fall under one of the full exemptions, two subtractions can still reduce what Wisconsin taxes. You can use one or the other, not both, and neither can be stacked on income that’s already exempt.
The $24,000 Subtraction at Age 67
Beginning with the 2025 tax year, you can subtract up to $24,000 of qualifying retirement income if you are at least 67 by December 31 of the tax year. Married couples filing jointly can subtract up to $48,000 when both spouses are 67 or older.7Wisconsin State Legislature. Wisconsin Code 71.05(6)(b)54m – Retirement Income Subtraction Qualifying income includes distributions from 401(k), 403(b), and defined benefit plans, plus traditional IRAs.4Wisconsin Department of Revenue. Wisconsin Tax Information for Retirees
There is no income phase-out, which is what makes this subtraction more useful than the older $5,000 version for most retirees. The catch: if you claim it, you cannot claim any of the credits listed under Wis. Stat. 71.10(4) for the same year, which includes the homestead credit and several other personal credits.7Wisconsin State Legislature. Wisconsin Code 71.05(6)(b)54m – Retirement Income Subtraction Run the numbers both ways before choosing.
Income already exempt under the military, uniformed services, pre-1964 local, or pre-1984 federal provisions cannot be counted again toward this subtraction, and neither can railroad retirement.7Wisconsin State Legislature. Wisconsin Code 71.05(6)(b)54m – Retirement Income Subtraction
The Older $5,000 Subtraction
The prior subtraction is still on the books. You can subtract up to $5,000 of qualifying retirement income if you are at least 65 by year-end and your federal adjusted gross income is below $15,000 as a single filer or below $30,000 if married (joint or separate).4Wisconsin Department of Revenue. Wisconsin Tax Information for Retirees It mostly helps lower-income retirees in the 65-to-66 window who don’t yet qualify for the $24,000 version.
If You Moved: Out-of-State Pensions and Residency
Retired from another state’s public employee system and now living in Wisconsin? That pension is taxable here. Wisconsin offers no special exemption for other states’ government retirement plans, and because the state follows federal AGI, anything taxable federally comes along.1Wisconsin Department of Revenue. Individual Income Tax – Retired Persons You can still claim the $24,000 or $5,000 subtraction if you meet the age and income rules.
If you earned your pension in Wisconsin but now live elsewhere, Wisconsin cannot tax those distributions. Federal law at 4 U.S.C. 114 bars states from taxing nonresidents’ retirement income, even when the pension was fully earned in the taxing state.8Office of the Law Revision Counsel. 4 U.S. Code 114 – Limitation on State Income Taxation of Certain Pension Income Your current state of residence handles it instead.
Part-year residents are taxed on distributions received while living in Wisconsin, no matter where the pension was earned. Qualified-plan distributions received before you moved in or after you moved out generally are not Wisconsin-taxable.9Wisconsin Department of Revenue. Tax Information for Part-Year Residents and Nonresidents of Wisconsin Timing can matter: if you’re planning a mid-year move, think about whether a large distribution should wait until after your residency changes.
No Wisconsin Estate or Inheritance Tax
Wisconsin eliminated its estate tax for deaths after December 31, 2012, and has no inheritance tax. Retirement accounts you leave to heirs face no Wisconsin death tax. A beneficiary who later takes distributions from an inherited traditional IRA or pension will owe Wisconsin income tax on those payouts under the normal rules, but the transfer itself is not separately taxed.