Wisconsin’s New Retirement Income Subtraction

If you were 67 or older in 2025, did you notice a new subtraction on your 2025 Wisconsin tax return? 
 
Wisconsin is now offering a new retirement income subtraction that may reduce state taxable income for many older residents. The subtraction first applies to 2025 Wisconsin income tax returns, which were filed, or generally will be filed, in 2026. Any applicable subtraction is on Schedule SB of the Wisconsin return.
 
Under the new rule, Wisconsin residents who are at least age 67 by the end of the tax year may be able to subtract up to $24,000 of eligible retirement income from Wisconsin taxable income. For married couples filing jointly, the subtraction may be as much as $48,000 if both spouses are aged 67 or older by the end of the tax year and otherwise qualify.
 
Eligible retirement income generally includes federally taxable distributions from qualified retirement plans and individual retirement accounts, such as traditional IRAs, 401(k)s, 403(b)s, pensions, and annuity income. The subtraction applies only to income that has not already been excluded from Wisconsin taxable income under another provision.

This new subtraction is especially notable because it does not have an income phaseout. That means eligible taxpayers may qualify regardless of their total income level. However, nonresidents are not eligible, and part-year residents may need to prorate the subtraction.
 
There are also some important planning considerations. Certain types of retirement income, such as Social Security, military retirement, railroad retirement, and some pre-1964 public retirement benefits, may already receive favorable Wisconsin tax treatment and generally would not be counted toward this new subtraction. In addition, taxpayers who claim the new retirement income subtraction may not be able to claim Wisconsin income tax credits for that same tax year.