Wisconsin does not tax Social Security benefits

Wisconsin exempts all Social Security retirement, survivor, and disability benefits from state income tax. This means the income you receive from Social Security is not subject to Wisconsin's income tax, regardless of your total income or filing status.

However, your Social Security benefits may still be taxable at the federal level. The federal government uses a formula based on your "combined income" — which includes half your Social Security benefits plus all other income — to determine whether any portion of your benefits is subject to federal tax. Wisconsin's exemption applies only to state taxes, not federal ones.

Key Takeaways

  • Wisconsin does not tax Social Security benefits at the state level, even if your total income is high.
  • Federal tax on Social Security depends on your combined income (half your benefits plus other income), and Wisconsin's state exemption does not change this.
  • If you owe federal tax on Social Security, you can request that the Social Security Administration withhold taxes from your monthly payment.
  • You will report your Social Security income on your federal tax return, but you do not need to report it on your Wisconsin state return.

How federal taxation of Social Security works

The federal government taxes Social Security based on your combined income. Combined income is calculated as your adjusted gross income plus nontaxable interest plus half of your Social Security benefits. If your combined income exceeds a threshold, up to 50 percent or 85 percent of your benefits may be taxable at the federal level, depending on how far over the threshold you are.

The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These thresholds have not changed since 1984 and do not adjust for inflation. If your combined income is below these amounts, none of your Social Security is taxable federally. If it is above them, you will owe federal tax on a portion of your benefits.

Wisconsin's exemption of Social Security from state tax does not reduce your federal tax liability. You still report your Social Security income on your federal Form 1040 and calculate any federal tax owed using the federal rules.

What counts as income for the federal threshold

Combined income includes wages, self-employment income, interest, dividends, capital gains, rental income, and income from pensions or retirement accounts. It also includes distributions from IRAs and 401(k)s, even if you do not need the money. Tax-exempt interest from municipal bonds counts toward the threshold.

Some income does not count toward combined income. Supplemental Security Income (SSI) is excluded. Workers' compensation is excluded. Veterans' benefits are excluded. However, most other retirement and investment income does count, which is why people with pensions, rental property, or substantial savings sometimes owe federal tax on Social Security even if they have no wages.

Withholding federal tax from your Social Security payment

If you expect to owe federal tax on your Social Security benefits, you can ask the Social Security Administration to withhold taxes from your monthly payment. You do this by completing Form W-4V and submitting it to your local Social Security office or mailing it to the address on the form.

You can choose to have 7, 10, 12, or 22 percent of your benefit withheld. The Social Security Administration will send the withheld amount to the IRS on your behalf. This does not change your benefit amount — it simply reduces what you receive each month and sends the difference to cover your tax liability.

If you do not withhold taxes and owe federal tax on your Social Security, you can still pay when you file your federal return. Some people choose this route if they want to keep the full benefit amount each month and have other income sources to pay the tax from.

Reporting Social Security on your Wisconsin return

You do not report Social Security benefits on your Wisconsin Form 1 income tax return. Wisconsin's tax forms do not have a line for Social Security income because it is fully exempt from state tax.

If you file a federal return because you owe federal tax on your Social Security or for other reasons, you will report your benefits on your federal Form 1040. But you will not transfer that amount to your Wisconsin return. This is one of the few situations where your federal and state returns differ significantly.

Other Wisconsin tax considerations for retirees

Wisconsin also exempts military pensions and certain other retirement income from state tax, though the rules vary. If you receive a pension from your former employer, a 401(k) distribution, or an IRA withdrawal, those are generally taxable in Wisconsin unless they fall under a specific exemption. Social Security is the broadest exemption available to retirees in the state.

If you are over 65, Wisconsin offers a property tax credit that may reduce your property taxes. This credit is separate from the income tax exemption for Social Security and is based on your household income and property taxes paid. You claim this credit on your Wisconsin return even though you do not report Social Security income there.

Frequently Asked Questions

Do I have to file a Wisconsin tax return if I only receive Social Security?

No. If Social Security is your only income and you have no other reason to file, you do not need to file a Wisconsin return. However, if you have other income — wages, pensions, interest, or dividends — you may need to file depending on the amount. Check the Wisconsin Department of Revenue website for current filing thresholds based on your age and filing status.

Will my Social Security affect my Wisconsin property tax credit?

No. Social Security is excluded from the income calculation for Wisconsin's property tax credit for seniors. Your household income for the credit is calculated without including Social Security, so receiving benefits does not reduce the credit you may receive.

What if I moved to Wisconsin from another state that does tax Social Security?

Once you are a Wisconsin resident, Wisconsin's exemption applies to your Social Security income going forward. You will not owe Wisconsin tax on benefits received while you lived in Wisconsin. However, you may still owe tax to your former state on benefits received while you lived there, depending on that state's rules.

Can I deduct my federal taxes on Social Security from my Wisconsin return?

No. Wisconsin does not allow a deduction for federal income taxes paid. Even if you pay federal tax on a portion of your Social Security benefits, you cannot reduce your Wisconsin taxable income by that amount. However, since Social Security is exempt from Wisconsin tax entirely, this does not affect you.

Does the Social Security earnings test affect my taxes?

No. The earnings test — which reduces your benefit if you work before full retirement age — does not change how your benefits are taxed. You still report the full amount of benefits you received to the IRS, even if some were withheld due to earnings. Wisconsin continues to exempt all benefits from state tax regardless of the earnings test.