Wisconsin Retirees: $24,000 Now Tax-FREE at Age 67!

Jeremy Keil explains the new tax break for retirees in Wisconsin effective in 2025.

If you’re a retiree living in Wisconsin, I’ve got some great news for you. Starting in 2025, the state has introduced a brand-new tax break that could save you hundreds, even thousands of dollars every year.

If you’re age 67 or older, you can now exclude up to $24,000 of your retirement income from Wisconsin state income taxes. And if you’re married, that amount could be up to $48,000 per year. Let’s walk through what this could mean for you, how it works, and some strategies to help you make the most of it.

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What’s Included in the $24,000 Exclusion?

This tax break applies specifically to retirement income such as:

• Withdrawals from your traditional IRA
  
• Distributions from your 401(k) or 403(b)
  
• Pension payments
  

It does not apply to wages, part-time job income, or rental property income, even if those are part of your personal retirement plan.

And keep in mind—Social Security was already tax-free in Wisconsin, so this exclusion does not include those benefits.

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Who Qualifies?

The requirements are straightforward:

• You must be 67 or older during the tax year.
  
• You must be a Wisconsin resident.
  
• The income must come from a retirement source.
  

This exclusion applies per person, which means a married couple could potentially exclude $48,000 from their state taxable income each year.

But here’s where it gets tricky: we’re still waiting to see exactly how Wisconsin will apply the rules for couples. In states like Kentucky, the exclusion is per taxpayer, which means you’ll want to split withdrawals between both spouses to maximize the benefit. If Wisconsin follows that model, you might be better off taking $24,000 each per year instead of $48,000 from just one spouse’s account.

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Potential Tax Savings

So how much could this new rule save you?

• If you’re in Wisconsin’s 4.4% tax bracket, excluding $24,000 of retirement income saves you about $1,056 per year.
  
• If you’re in the 5.3% tax bracket, that savings jumps to around $1,272 per year.
  

Multiply that by two for a married couple, and the savings add up fast—potentially over $2,000 each year.

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Planning Opportunities

This new rule also opens up some tax planning opportunities:

1. Perhaps delay Roth Conversions Until After 67
   If you’re nearing 67, you may want to wait before completing Roth conversions. In states like Illinois, where retirement income is totally excluded, many retirees have converted hundreds of thousands of dollars without paying state income tax. Wisconsin retirees now may have a similar opportunity.
   
2. Coordinate Between Federal and State Taxes
   While this Wisconsin exclusion is fantastic, don’t forget about federal taxes. They still apply to your retirement income. Always weigh both sides before making decisions.
   
3. Strategize Withdrawals for Couples
   If the state confirms this exclusion is truly “per person,” splitting withdrawals could maximize your tax-free benefit. That means instead of drawing heavily from just one spouse’s account, balancing withdrawals could put thousands back in your pocket each year.
   

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Putting It All Together

This new Wisconsin retirement income exclusion is a win for retirees. It gives you more flexibility with your income strategy and helps keep more money in your pocket.

But remember—this is just one piece of the puzzle. Tax planning should always be part of a bigger retirement strategy that also considers your income needs, investment growth, and long-term healthcare costs.

That’s why at Keil Financial Partners, tax planning is step three in our Retirement Master Plan. If you’d like to see how to incorporate tax savings like this into your retirement strategy, visit 5StepRetirementPlan.com to watch my free video series.

And of course, if you want personalized advice, head over to KeilFP.com to see how my team and I can help you get more income, pay less in taxes, and avoid big retirement mistakes.

Links:

• Wisconsin Individual Income Tax  – Retired Persons – Wisconsin Department of Revenue
• How Your Retirement Benefits are Taxed – Wisconsin Department of Revenue
• Wisconsin Tax Information for Retirees – Wisconsin Department of Revenue
• “Wisconsin now has ‘generous’ tax break on retirement income. What seniors should know.” – Milwaukee Journal Sentinel
• Estimated Distribution of Individual Income Tax Reductions in Motion #44 – Bob Lang, Legislative Fiscal Bureau
• 5StepRetirementPlan.com – Jeremy Keil

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