Partly taxed
How Wisconsin taxes retirement income
Wisconsin does not tax Social Security. Starting with 2025 returns, people 67 and older can subtract up to $24,000 a year of retirement income, or $48,000 on a joint return when both spouses are 67 or older. It covers WRS pensions, company pensions and withdrawals from 401(k), 403(b), 457(b) and IRA accounts.
There is one catch. Anyone who takes the new subtraction gives up every Wisconsin tax credit for that year, such as the itemized deduction credit and the homestead credit. For most retirees with a sizable pension the subtraction is still the better deal, but it is worth running both ways.
Lower-income retirees 65 and older can instead use an older $5,000 subtraction. Military retirement pay is fully exempt. Income above the subtractions is taxed at rates from 3.5% to 7.65%.
Questions
Does Wisconsin tax WRS pensions?
From 2025, the first $24,000 per person is exempt at 67 and older. The rest is taxed.
Does Wisconsin tax Social Security?
No. Social Security is fully exempt.
What is the catch with the $24,000 subtraction?
Claiming it means giving up all Wisconsin tax credits for that year.