Does Wisconsin Tax Military Retirement?
As a veteran, it’s essential to understand how military retirement benefits are taxed by the state of Wisconsin. In this article, we’ll delve into the complexities of Wisconsin’s tax laws and provide a clear answer to the question: does Wisconsin tax military retirement?
Direct Answer:
Wisconsin does tax military retirement benefits, but at a relatively low rate. Wisconsin is one of the many states that taxes military retirement pay, but it follows the federal tax treatment guidelines. This means that a portion of your military retirement pay is subject to Wisconsin state income tax.
Understanding Wisconsin’s Tax Brackets:
Wisconsin’s state income tax brackets range from 4.40% to 7.65%. The state taxes military retirement pay as regular income, which means that it’s subject to taxation at the individual’s taxable income level. Here’s a breakdown of Wisconsin’s 2022 tax brackets:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $13,000 | 4.40% |
| $13,001 – $26,000 | 5.40% |
| $26,001 – $40,000 | 6.27% |
| $40,001 – $132,000 | 7.65% |
Federal Tax Treatment:
The federal government also taxes military retirement pay, and this tax treatment plays a crucial role in determining Wisconsin’s tax liability. The amount of military retirement pay subject to federal income tax is typically 50% of your base pay, up to a maximum of $19,200 per year in 2022. Here’s a breakdown of federal tax rates for military retirees:
| Taxable Income | Tax Rate |
|---|---|
| $0 – $15,000 | 0% |
| $15,001 – $22,500 | 12% |
| $22,501 – $49,500 | 24% |
| $49,501 – $150,000 | 32% |
Wisconsin’s Tax Exemptions:
Wisconsin provides some tax exemptions for military retirees, which can reduce their state tax liability. These exemptions include:
• Federal Pension Exclusion: Wisconsin allows military retirees to exclude up to 100% of their federal pension income from state tax liability. This exclusion is limited to the amount subject to federal income tax.
• Disability and Death Benefits: Wisconsin exempted from state income tax certain disability and death benefits paid to military retirees or their survivors.
Conclusion:
In conclusion, Wisconsin does tax military retirement benefits, but the amount subject to taxation is generally limited to the amount not exempt from federal income tax. Military retirees should carefully review their individual tax situations and consult with a tax professional to ensure they are taking advantage of available tax exemptions and credits. Remember to also consider federal and state tax implications when making decisions about your military retirement benefits.
Additional Considerations:
• Other Sources of Income: Military retirees should consider all sources of income when planning their taxes, including retirement accounts, Social Security, and other pensions.
• Tax Credits: Wisconsin offers various tax credits for military retirees, including a credit for disabled veterans and a credit for veterans with dependent children.
• Professional Tax Advice: Military retirees are encouraged to consult with a tax professional to ensure they are taking advantage of all available tax exemptions and credits.
Table 1: Wisconsin Tax Rates for Military Retirees
| Taxable Income | Federal Tax Rate | Wisconsin Tax Rate |
|---|---|---|
| $0 – $15,000 | 0% | 4.40% |
| $15,001 – $22,500 | 12% | 5.40% |
| $22,501 – $49,500 | 24% | 6.27% |
| $49,501 – $150,000 | 32% | 7.65% |
Table 2: Wisconsin Tax Exemptions for Military Retirees
| Type of Income | Exclusion Amount |
|---|---|
| Federal Pension Income | Up to 100% of federal income tax liability |
| Disability and Death Benefits | N/A |
By understanding Wisconsin’s tax laws and planning accordingly, military retirees can minimize their tax liability and maximize their retirement benefits.
