Wisconsin State Tax Guide 2025

Welcome to Wisconsin! As you settle into the Badger State, understanding the local tax landscape is essential for financial planning. Wisconsin’s tax structure is distinct, featuring a progressive income tax, moderate sales taxes, and property taxes that are slightly above the national average.

This guide breaks down the key taxes you will encounter as a resident in 2025.

1. Income Tax

Wisconsin utilizes a progressive income tax system. Unlike a flat tax system where everyone pays the same rate regardless of income, Wisconsin’s rates increase as your taxable income rises.

2025 Tax Brackets (Estimated)

Note: While specific bracket thresholds are adjusted annually for inflation, the rate structure generally remains consistent.

The state applies the following marginal tax rates based on your filing status and income level:

4.4% on the first tier of income.
5.3% on the next tier.
6.1% on the next tier.
7.65% on the highest tier of income.

Key Characteristics:

Progressive Rates: You only pay the higher rate on the portion of your income that falls into that specific bracket.
Filing Status: Rates differ slightly depending on whether you file as Single, Married Filing Jointly, Head of Household, or Married Filing Separately.
Taxable Income: Wisconsin starts with your federal Adjusted Gross Income (AGI) but makes specific adjustments. Notably, Wisconsin does not allow for the deduction of federal taxes paid on your state return.

2. Sales Tax

Sales tax in Wisconsin is a combination of the state rate and potential local rates.

State Rate: The statewide sales tax rate is 5.0%.
Local Taxes: Counties in Wisconsin are authorized to impose an additional county sales tax. Most counties levy a 0.5% county tax, bringing the total sales tax to 5.5% in many areas.
- Example: If you shop in Madison (Dane County) or Milwaukee (Milwaukee County), you will likely pay a total of 5.5%.
Exceptions: Some municipalities, particularly in tourist areas, may have additional tourist taxes or specific levies.

What is Taxed?

Taxable: Most retail goods, telecommunications, and utilities.
Exempt: Groceries for home consumption (not prepared food), prescription medications, and some agricultural equipment are generally exempt from sales tax.

3. Property Tax

Property taxes in Wisconsin are primarily levied by local governments (counties, school districts, cities, and villages) rather than the state. These taxes fund public schools, law enforcement, and infrastructure.

General Context: Wisconsin property tax rates are typically slightly above the national average.
Effective Rate: While rates vary significantly by municipality, homeowners often see effective rates ranging between 1.5% and 2.0% of the home's assessed value.
Assessment: Local assessors determine the market value of your property. Wisconsin offers a "first-dollar" exemption for primary residences, which reduces the taxable value slightly for owner-occupied homes.
Renters: While you do not pay property tax directly, property taxes are factored into the cost of rent.

4. Other Taxes

Beyond income, sales, and property, Wisconsin has specific taxes that affect daily life.

Gas Tax: Wisconsin imposes a tax on motor vehicle fuels. As of 2025, the state gas tax is approximately 30.9 cents per gallon for regular gasoline (subject to annual CPI adjustments).
"Sin" Taxes: Wisconsin applies specific excise taxes to alcohol and tobacco products.
- Cigarettes: Roughly $2.52 per pack (among the higher rates in the Midwest).
- Alcohol: Excise taxes vary by alcohol content and type (beer, wine, liquor).
Inheritance Tax: Wisconsin does not have an inheritance tax. However, it is important to note that while beneficiaries do not pay tax on inherited assets, the estate itself may be subject to the federal estate tax if it exceeds the federal exemption limit.
Vehicle Registration: Vehicle registration fees are based on the weight and age of the vehicle. These are generally considered moderate compared to other states.

5. Retirees and Taxes

Wisconsin is moderately tax-friendly for retirees, though it depends on the source of income.

Retirement Income: Wisconsin generally taxes income from pensions and withdrawals from 401(k)s and IRAs. However, the state offers a pension exemption (specifically for "public" pensions, and a limited exemption for "private" pensions) if your total income is below certain thresholds.
Social Security: Social Security benefits are exempt from Wisconsin state income tax for most retirees.
Property Tax Relief: Wisconsin offers a "Circuit Breaker" property tax credit for low-to-moderate-income seniors (age 65+), which caps property taxes as a percentage of income.
Homestead Credit: A credit is available for low-income homeowners and renters who meet specific income requirements.

6. Comparison to Neighbors

How does Wisconsin stack up against its bordering states?

Illinois: Wisconsin has a significantly lower income tax than Illinois (which has a flat 4.95% rate). However, Wisconsin’s property taxes are generally higher than Illinois'.
Minnesota: Wisconsin is generally more tax-friendly than Minnesota, which has a higher top income tax rate (9.85%) and higher sales taxes in most areas.
Iowa: Iowa recently shifted to a flat income tax rate of 3.9% (as of 2025), making it more attractive for high earners than Wisconsin’s progressive structure.
Michigan: Michigan has a flat 4.25% income tax, which is lower than Wisconsin’s top rate. However, Michigan’s property taxes can be higher, and they have a 6% sales tax compared to Wisconsin’s 5%.

Disclaimer

Tax laws change frequently and are subject to individual circumstances. The information provided in this guide is for general informational purposes only and is based on 2025 data. It does not constitute legal or financial advice. Always consult with a Certified Public Accountant (CPA) or tax professional before making financial decisions.