Wisconsin taxes for early retirees: Social Security is free, and 67 is the magic number

By Tom, CPA · Updated October 29, 2026

TL;DR: Wisconsin taxes IRA, 401(k) and pension income at 3.5% to 7.65% for 2026 and doesn't tax Social Security. From 2025, people 67 or older can subtract up to $24,000 of retirement income ($48,000 if both spouses are 67), but give up all state credits that year. There's no estate tax.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Wisconsin has cheese curds, supper clubs and a fresh 2025 law that hands residents 67 and older a retirement income subtraction of up to $24,000 each. For early retirees, though, the important number is 67: until then, Wisconsin taxes your IRA withdrawals and Roth conversions like any other income, at rates up to 7.65%.

This guide covers the 2026 Wisconsin brackets, the sliding standard deduction, tax-free Social Security, the new age-67 subtraction and the credits you give up to claim it, property tax credits, sales tax, estate tax and residency. Our guides are Frugal Fran, who keeps a deer-camp budget in a spreadsheet, and Lavish Larry, who bought season tickets and a lake cabin in the same week.

CPA Warning Label: Claiming Wisconsin's age-67 retirement subtraction wipes out every Wisconsin tax credit for that year, so it can backfire if your credits exceed the tax it saves.

The 2026 brackets: 3.5% to 7.65%

2025 Act 15 widened the 4.4% bracket starting in 2025, and the thresholds are indexed. The 2026 rate schedules from the Department of Revenue:

Married filing separately uses $10,080, $34,630 and $221,820. For most FIRE households the working range is 4.4% to 5.3%; 7.65% is for very large income years.

The sliding standard deduction and exemptions

Wisconsin's standard deduction shrinks as income rises. For 2026, married couples filing jointly get $25,840 if Wisconsin income is under $29,040; above that it drops by 19.778% of the excess and reaches zero at $159,690. Single filers start at $13,960, reduced by 12% of income over $20,120, reaching zero at $136,453. Head of household starts at $18,030.

Exemptions are $700 per person, plus $250 for each person 65 or older.

The phase-out is a hidden tax: for a couple in the phase-out range, each extra $1,000 of income also removes $197.78 of standard deduction, so at the 4.4% rate the effective marginal rate is about 4.4% x 1.19778, or 5.27%.

What Wisconsin taxes, and the new age-67 subtraction

Social Security: not taxable in Wisconsin.

IRA, 401(k), pensions and Roth conversions: taxable, except for specific exempt categories such as military retirement and certain older public pension plans.

New for 2025 and later: under 2025 Act 15, a person who is at least 67 by December 31 can subtract up to $24,000 of retirement income from qualified retirement plans and IRAs that isn't already exempt. A married couple filing jointly can subtract up to $48,000 only if both spouses are 67 or older; if only one is, the limit is $24,000. The department says Roth conversion income, required minimum distributions and inherited IRA distributions can qualify for an eligible person, but commercial annuities don't.

The catch: if you claim this subtraction, you can't claim any Wisconsin tax credit that year, including the itemized deduction credit, the school property tax credit and the married couple credit. Run it both ways.

There's also an older $5,000 subtraction for people 65 or older with federal AGI under $15,000 ($30,000 for married couples), which few FIRE households will meet.

Capital gains, dividends and interest: taxed at the regular rates, except that 30% of net long-term capital gains (60% for farm assets) is excluded on Schedule WD, so a $10,000 long-term gain is taxed as $7,000.

Illustration: the same couple at 60 and at 67

Fran and her spouse file jointly for 2026 and withdraw $60,000 a year from IRAs.

At 60, no Social Security, no subtraction: Wisconsin income is $60,000. Standard deduction: $25,840 - 19.778% x ($60,000 - $29,040) = $25,840 - $6,123.27 = $19,716.73. Exemptions: $1,400. Taxable income: $60,000 - $19,716.73 - $1,400 = $38,883.27. Tax: $705.25 + 4.4% x ($38,883.27 - $20,150) = $705.25 + $824.26 = $1,529.51 (the department's tables may round slightly differently).

At 67, both spouses, with $40,000 of Social Security: Social Security is excluded. The $60,000 of IRA income minus the $48,000 subtraction leaves $12,000 of Wisconsin income, well under $29,040, so the full $25,840 standard deduction applies and taxable income is zero. Wisconsin tax: $0. They give up credits, but there's no tax left for credits to reduce.

The planning twist: Wisconsin rewards taking IRA income or Roth conversions after 67 up to the subtraction limit, the opposite of the usual convert-early advice. Weigh that against the federal picture in the Roth conversion ladder timeline and the tax torpedo guide.

Property tax: credits for owners and renters

Wisconsin property taxes run relatively high. Relief comes through credits:

• Lottery and gaming credit: for Wisconsin residents who own and use a home as their primary residence on January 1. It shows up on the property tax bill.
• School property tax credit: an income tax credit for property taxes or rent paid, lost if you claim the age-67 subtraction.
• Homestead credit: for 2025, household income must be under $24,680, and the maximum credit is $1,168. Household income counts broadly, so low AGI alone may not qualify you.

Sales tax and estate tax

The state sales tax is 5%, and most counties add 0.5% (Milwaukee County's rate is 0.9%). Since October 1, 2025, residential electricity and natural gas are exempt year-round, which helps in a state where winter has opinions.

Estate and inheritance tax: Wisconsin has none. Only the federal estate tax can apply.

A Wisconsin withdrawal strategy

Wisconsin's rules create a three-phase plan for many FIRE households:

• Phase 1, early retirement to 67: IRA withdrawals and Roth conversions are taxed at 3.5% to 5.3% for most households, plus the standard deduction phase-out. Convert enough to manage future required minimum distributions, but remember that Wisconsin itself will soon be more generous.
• Phase 2, both spouses 67 or older: up to $48,000 a year of retirement plan and IRA income, including Roth conversions, can be subtracted, and Social Security is already excluded. Many couples can bring Wisconsin taxable income to zero here.
• Phase 3, required minimum distributions: RMDs qualify for the subtraction too, but large ones can exceed the $48,000 limit. Conversions in phase 2 shrink later RMDs.

Check each year whether the subtraction beats your credits. A couple with a large itemized deduction credit or school property tax credit and modest retirement income might come out ahead skipping it.

If only one spouse has reached 67, the cap is $24,000, so a big age gap between spouses delays the full benefit. And because nonresidents can't claim the subtraction and part-year residents prorate it, the timing of a move into or out of Wisconsin around age 67 matters.

Finally, coordinate with the federal side. The subtraction lowers Wisconsin tax only; it does nothing for the federal tax on the same conversion or for Medicare premium surcharges, which use federal income.

Residency and estimated payments

Wisconsin taxes full-year residents on all income. Part-year residents prorate the age-67 subtraction, and nonresidents can't claim it. Snowbirds heading to Arizona or Florida should read the residency change guide.

You generally must pay 2026 estimated tax if you expect to owe at least $500 after withholding and credits and your withholding will be less than 90% of your 2026 tax or 100% of your 2025 tax. Installments are due April 15, June 15 and September 15, 2026 and January 15, 2027.

Compare with the Illinois, Minnesota and Michigan guides, or use the state tax move calculator.

Everything here comes from Wisconsin Department of Revenue publications as of October 29, 2026. This is general education, not personalized advice.