Wisconsin does tax pensions, and most retirement income is taxed the same as wages at rates from 3.50% to 7.65%. The state makes four big exceptions: military retirement pay, Social Security benefits, railroad retirement, and pensions tied to a short list of public-employee systems whose members joined before 1964. Everything else, including Wisconsin Retirement System benefits, 401(k) withdrawals, traditional IRA distributions, and private pension payments, is taxable at ordinary income rates.
How the Tax Works on a Typical Pension
Wisconsin begins with your federal adjusted gross income. If a pension or retirement distribution is taxable federally, it is taxable in Wisconsin too, unless a specific state subtraction applies.1Department Of Revenue. Individual Income Tax – Retired Persons
The 2025 brackets for a single filer tax the first $14,680 of taxable income at 3.50%, income up to $50,480 at 4.40%, income up to $323,290 at 5.30%, and anything above that at 7.65%. Joint filers use wider brackets with the same four rates.2Department Of Revenue. Individual Income Tax Rates
Because Wisconsin follows federal treatment, anything you already excluded on your federal return stays excluded here. Qualified Roth IRA and Roth 401(k) withdrawals are not in federal gross income, so Wisconsin does not tax them either.
Retirement Income Wisconsin Does Not Tax
Military and Uniformed Services Retirement Pay
All U.S. military retirement pay is exempt from Wisconsin income tax, with no cap and no age requirement. The exemption also covers retirement payments from the Coast Guard, the commissioned corps of NOAA, and the commissioned corps of the Public Health Service.3Wisconsin State Legislature. Wisconsin Code 71.05 – Income Computation Subtract the full amount on your Wisconsin return.
Social Security Benefits
Wisconsin does not tax Social Security at all. Retirement, disability, and survivor benefits are fully exempt at the state level, even when part of the benefit is taxed federally.1Department Of Revenue. Individual Income Tax – Retired Persons
Railroad Retirement
Railroad retirement payments and supplemental annuities are exempt. Federal law bars states from taxing the supplemental annuities, and Wisconsin lets you subtract these amounts from your adjusted gross income.4Legal Information Institute. Wisconsin Administrative Code Tax 3.098
The Pre-1964 Public Pension Exemption
A narrow legacy rule exempts pension payments from certain public-employee retirement systems, but only if the recipient (or the worker whose account generated the payments) was a member of that system on December 31, 1963, or had already retired from it by that date. The qualifying systems are:
- U.S. Civil Service Retirement System
- U.S. Military Employee Retirement System
- City of Milwaukee Employees’ Retirement System
- Milwaukee County Employees’ Retirement System
- Sheriff’s Annuity and Benefit Fund of Milwaukee County
- Police Officer’s Annuity and Benefit Fund of Milwaukee
- Fire Fighter’s Annuity and Benefit Fund of Milwaukee
- Milwaukee Public School Teachers’ Annuity and Retirement Fund (now part of the Public Employee Trust Fund)
- Wisconsin State Teachers Retirement System (now part of the Public Employee Trust Fund)
Beneficiaries of someone who met either condition also qualify.3Wisconsin State Legislature. Wisconsin Code 71.05 – Income Computation Only the portion of benefits tied to pre-1964 membership is exempt. Any portion from service that began after December 31, 1963, or from a system not on the list, stays taxable.1Department Of Revenue. Individual Income Tax – Retired Persons
One trap: tax-sheltered annuity benefits (such as 403(b) accounts) administered by these same systems do not qualify. They are taxed the same way they are taxed federally, even if the underlying retirement system is on the exempt list.5Wisconsin State Legislature. Wisconsin Administrative Code Tax 2.94 – Tax-Sheltered Annuities
Wisconsin Retirement System Benefits Are Taxable
This is where the biggest misunderstanding sits. The Wisconsin Retirement System (WRS) covers most current state and local government workers, teachers, and university staff. WRS benefits are fully taxable in Wisconsin. The pre-1964 exemption covers predecessor systems that merged into the WRS, and it reaches only members who joined before January 1964. If you joined later, or joined the WRS directly, your pension is taxed as ordinary income.1Department Of Revenue. Individual Income Tax – Retired Persons
Your plan administrator reports the taxable amount on Form 1099-R, and that figure flows into your Wisconsin return. You may still qualify for the $5,000 subtraction below.
The $5,000 Retirement Income Subtraction
Retirees who don’t qualify for a full exemption can subtract up to $5,000 of qualified retirement plan income, but only if they meet both tests:
- You (or your spouse on a joint return) are at least 65 by December 31 of the tax year.
- Your federal adjusted gross income is less than $15,000 (single) or less than $30,000 of combined income (joint).
The subtraction applies to otherwise-taxable distributions from qualified retirement plans, pensions, and annuities.6Department Of Revenue. Wisconsin Tax Information for Retirees Exceed the income limit by a dollar and the whole subtraction disappears, so the benefit is realistically limited to retirees with very modest income.1Department Of Revenue. Individual Income Tax – Retired Persons
Withholding and Estimated Payments
Wisconsin does not require pension payers to withhold state income tax. If you take WRS benefits and request nothing, nothing comes out for state tax. You can elect withholding based on the state tax tables, which adjusts automatically when your benefit or the tables change, or request a specific flat dollar amount.7Wisconsin Department of Employee Trust Funds. Tax Withholding for Retirement Payments
Without withholding, you likely need quarterly estimated payments. Wisconsin generally requires them when your return will show a balance due of $500 or more, and missing a payment triggers interest. The quarterly due dates track the federal schedule: April 15, June 15, September 15, and January 15.6Department Of Revenue. Wisconsin Tax Information for Retirees Setting up withholding through your pension administrator is usually simpler, spreading the tax evenly across each payment.
Claiming the Exemption on Your Return
Start with Form 1099-R from your plan administrator. Box 2a shows the federally taxable amount, which is Wisconsin’s baseline. To claim any subtraction, complete Schedule SB and carry the result to Form 1. Schedule SB has separate lines for military and uniformed services retirement, local and state retirement under the pre-1964 rule, federal retirement benefits, railroad retirement, and the $5,000 retirement income subtraction.8Department Of Revenue. 2025 Form 1 Instructions
If you receive distributions from more than one source, each 1099-R may map to a different Schedule SB line. Keep the forms organized by source, and match each distribution to the correct subtraction before you file. A veteran’s military exemption and a pre-1964 public pension exemption live on different lines, and putting an amount on the wrong line is the most common reason a legitimate subtraction gets questioned.