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Does Wisconsin tax military retirement income?
No. All retirement payments received from the U.S. military retirement system (including payments from the Retired Serviceman's Family Protection Plan and the Survivor Benefit Plan) are exempt from Wisconsin income tax.
Defense Finance and Accounting Service (DFAS) only pays retirement income to military retirees and their surviving spouses and other family members. Therefore, retirement payments from this payer are always exempt from Wisconsin income tax.
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Does Wisconsin exempt any portion of military pay?
Military pay that is exempt for federal tax purposes is also exempt for Wisconsin. For example, military pay that qualifies for the federal combat pay exclusion is also exempt for Wisconsin tax purposes.
Note: A qualified hazardous duty area (the Sinai Peninsula of Egypt) is treated in the same manner as if it were a combat zone for purposes of the exclusion of certain combat pay of members of the armed forces.
In addition, two subtractions are available for Wisconsin purposes. These subtractions are described in A. and B. below. See
Publication 128,
Wisconsin Tax Information for Military Personnel and Veterans, for additional information.
- If you were a member of the Reserves or National Guard and served on active duty, you may subtract basic, special, and incentive pay that is included as taxable wages on your W-2 and meets all of the following:
- Received from the federal government
- Received after being called into active federal service or into special state service authorized by the federal Department of Defense
- Paid to you for a period of time during which you were on active duty and called into active federal service or special state service, even if the pay was received after the active duty period ended
Caution: The subtraction only applies to members of the Reserves or National Guard who are called into active federal service under 10 USC 12302(a), 10 USC 12304, or 10 USC 12304b or into special state service under 32 USC 502(f). Eligibility for the subtraction under 10 USC 12304b orders applies for tax years beginning after December 31, 2020. However, it does not apply to pay that members of the Reserves and National Guard receive for their weekend or two-week annual training. It also does not apply to a person who is serving on active duty or full-time duty in the active guard reserve (AGR) program. However, persons in the AGR program may qualify for a subtraction under B. below for U.S. Armed Forces Active Duty Pay.
- For tax years beginning after December 31, 2020, a subtraction is allowed for a member of the U.S. Armed Forces for the amount of basic, special, and incentive pay received from the federal government under 37 USC chapters 3 and 5 for active duty. A member of the U.S. Armed Forces includes all regular and reserve components subject to the following jurisdictions, including the Coast Guard and commissioned officers and personnel below the grade of commissioned officers in these forces:
- Secretary of Defense
- Secretary of the Army
- Secretary of the Navy
- Secretary of the Air Force
Caution: Do not include the following amounts in your subtraction:
- Basic pay for inactive duty training
- Basic housing allowance or any other nontaxable income reported on your leave and earnings statements
- Any amount subtracted as a member of the Reserves or National Guard under A. above (See note below.)
You are not required to send in a copy of your leave and earnings statements; however, including copies with your Wisconsin return, and a worksheet showing how you calculated the amount of your subtraction, may speed up the processing of your return.
Note: Starting with the 2024 taxable year the above subtractions have been combined onto a single line on the
Schedule SB and
Schedule M since any pay eligible for subtraction under 'A' also qualifies under 'B'.
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Are Wisconsin residents serving in the armed forces liable for Wisconsin income taxes?
Yes. Wisconsin residents in the armed forces are liable for Wisconsin income taxes on their entire annual Wisconsin net taxable income, regardless of the income source. Some military pay may be exempt from Wisconsin income tax. See
Question and Answer 2 for more information.
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Are Wisconsin residents serving in the armed forces and stationed outside Wisconsin or overseas liable for Wisconsin income taxes?
If a Wisconsin resident is serving in the armed forces outside Wisconsin, including overseas, the person is liable for Wisconsin income taxes on the entire annual Wisconsin net taxable income, wherever earned, just as if the person was physically present in Wisconsin throughout the year. Some military pay may be exempt from Wisconsin income tax. See
Question and Answer 2 for more information.
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Can a Wisconsin resident serving in the armed forces be taxed by any other state on military pay?
No. According to
50 U.S.C. 4001(b), a Wisconsin resident in the armed forces cannot be taxed on military pay by any other state. However, a Wisconsin resident can be taxed as a nonresident by another state on income, other than military pay, earned from employment or property in that state. In such a case, a tax credit would usually be allowed by Wisconsin.
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Is a resident of another state, who is stationed in Wisconsin on military orders, liable for Wisconsin income taxes on military pay?
No. However, this person is liable for Wisconsin income taxes on any income, other than military pay, from employment in Wisconsin, a business conducted in Wisconsin, property located in Wisconsin, a Wisconsin state lottery or a multi-jurisdictional lottery ticket purchased in Wisconsin, Wisconsin pari-mutuel wager winnings and purses, or winnings from a Native American casino or bingo hall located in Wisconsin. The person must file a Wisconsin tax return if their gross income from Wisconsin sources is $2,000 or more.
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Can a Wisconsin resident in the armed forces change their residence (domicile) to another state? If so, how?
Yes, a Wisconsin resident who enters the armed forces can change their residence (domicile) to another state if they meet the conditions under Option 1 or Option 2 below:
Option 1: The servicemember qualifies and makes an election to be a resident of another state under
50 U.S.C. 4001(a)(3) which provides:
For any taxable year of the marriage, a servicemember and the spouse of such servicemember may elect to use for purposes of taxation, regardless of the date on which the marriage of the servicemember and the spouse occurred, any of the following:
- The residence or domicile of the servicemember.
- The residence or domicile of the spouse.
- The permanent duty station of the servicemember.
Option 2:
- The servicemember intends to abandon their Wisconsin domicile and takes actions consistent with such intent,
- The servicemember intends to acquire a new domicile and takes actions consistent with such intent, and
- The servicemember is physically present in the new domicile.
Actions which express intent may include, but are not limited to:
- Changing legal documents, such as a will or insurance policies, to reflect the new residence
- Changing home of record upon reenlistment
- Registering to vote in the new locality
- Paying state taxes in the new locality
- Applying for a driver's license in the new state of residence and relinquishing the Wisconsin driver's license
- Registering a car in the new state of residence and relinquishing Wisconsin car registration
- Purchasing a home in the new state of residence and selling a Wisconsin home
- Consistently using the new permanent address on all appropriate records and correspondence
Caution: Moving from one duty station to another does not by itself constitute a change of residence. Filing the correct military papers to change your state of residency by itself does not constitute changing your state of residency. If you are unclear about your situation, you should contact the department for further clarification before you change your state of residency with the military.
Note: Persons claiming change of residence (domicile) from Wisconsin to another state should file a
Residence (Domicile) Questionnaire with the Wisconsin Department of Revenue.
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I am a Wisconsin resident in the military. My spouse is not a Wisconsin resident and has no Wisconsin income. Which tax return do I file for Wisconsin?
In this situation you have two options. You can file a Wisconsin
Form 1 with a filing status of married filing separately. Under this option, you show only your income on the Form 1. However, your tax may be higher than if you filed as married filing jointly.
The other option is to file a Wisconsin
Form 1NPR, which is the income tax form for part-year residents and nonresidents. Under this option you can file a joint return with your spouse even though your spouse is a nonresident. If you use Form 1NPR, your spouse's income will not be taxed. However, your spouse's income is used in calculating the ratio of your Wisconsin income to the combined federal income of you and your spouse. This ratio is then used to determine your Wisconsin tax. See the Wisconsin
Form 1NPR instructions for more information. You should compute your tax liability under both options and then file under the option that is most advantageous to you.
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If I am a Wisconsin resident in the armed forces or a resident of another state stationed in Wisconsin on military orders, is my spouse liable for Wisconsin income taxes?
Your spouse's income from services performed (for example, wages or services from self-employment) in Wisconsin is exempt from Wisconsin income tax if you and your spouse meet all the following conditions:
- You are a servicemember and present in Wisconsin in compliance with military orders.
- Your spouse is in Wisconsin solely to be with you.
- Your spouse qualifies and chooses to make an election under
50 U.S.C. 4001(a)(3) to use one of the following residences or domiciles:
- The residence or domicile of the servicemember.
- The residence or domicile of the spouse.
- The permanent duty state of the servicemember.
- Your spouse's choice of residence or domicile is not Wisconsin.
Caution: Your spouse's income from sources other than personal services may be taxable to Wisconsin. Examples include: rental income from property located in Wisconsin, a Wisconsin state lottery or a multijurisdictional lottery ticket purchased in Wisconsin, Wisconsin pari-mutuel wager winnings and purses, or winnings from a Native American casino or bingo hall located in Wisconsin.
Note: Even though your spouse's income may not be taxable to Wisconsin, it may be taxable to your spouse's state of residence.
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I am in the military and stationed outside Wisconsin. I remain a Wisconsin resident. My spouse, who is also from Wisconsin, is living with me outside Wisconsin. My spouse is not in the military but is earning income outside Wisconsin. Is my spouse still considered a Wisconsin resident and required to pay taxes to Wisconsin on income earned outside Wisconsin?
Your spouse is a Wisconsin resident unless they meet the conditions under Option 1 or Option 2 below:
Option 1: The spouse qualifies and makes an election to be a resident of another state under
50 U.S.C. 4001(a)(3) which provides:
For any taxable year of the marriage, a servicemember and the spouse of such servicemember may elect to use for purposes of taxation, regardless of the date on which the marriage of the servicemember and the spouse occurred, any of the following:
- The residence or domicile of the servicemember.
- The residence or domicile of the spouse.
- The permanent duty station of the servicemember.
Option 2:
- The spouse intends to abandon their Wisconsin domicile and takes actions consistent with such intent,
- The spouse intends to acquire a new domicile and takes actions consistent with such intent, and
- The spouse is physically present in the new domicile.
Actions which express intent may include, but are not limited to:
- Changing legal documents, such as a will or insurance policies, to reflect the new residence
- Changing home of record upon reenlistment
- Registering to vote in the new locality
- Paying state taxes in the new locality
- Applying for a driver's license in the new state of residence and relinquishing the Wisconsin driver's license
- Registering a car in the new state of residence and relinquishing Wisconsin car registration
- Purchasing a home in the new state of residence and selling a Wisconsin home
- Consistently using the new permanent address on all appropriate records and correspondence
If your spouse does not meet the conditions under Option 1 or Option 2, then your spouse would still be considered a Wisconsin resident and would be required to file Wisconsin income tax returns. A Wisconsin resident's world-wide income is reportable to Wisconsin.
Note: If your spouse is a Wisconsin resident and is living in another state solely to be with you (the service member) and you are there in compliance with military orders, income from services performed by the spouse is not taxable to the other state. The income is taxable only to Wisconsin.
If your spouse wishes to claim an exemption for withholding of their wages to the other state based on this federal law, contact that state's tax agency for their requirements and any additional information. If your spouse wishes to have taxes withheld for Wisconsin from their wages, they will need to work with their employer and should provide it a completed
Form WT-4. However, DOR has limited authority to require employers outside of Wisconsin to withhold taxes. It may be necessary to make estimated payments to DOR in place of having taxes withheld from the wages.
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I am a nonresident service member stationed in Wisconsin. My spouse and I own rental property in Wisconsin and are required to file a Wisconsin return. We wish to file a Form 1NPR using the married filing joint status. Does any of my military compensation get reported on the Form 1NPR?
No. According to 50 U.S.C. 4001(e), a tax jurisdiction may not use the military compensation of a nonresident service member to increase the tax liability imposed on other income earned by the nonresident service member or spouse subject to tax by the jurisdiction. This means that not only do you not report the nonresident service member military income in the Wisconsin column (column B, line 1) of the Form 1NPR, but you also do not include it in the Federal column (column A, line 1). The service member should fill in "09" in the "Special Conditions" box on Form 1NPR and write the amount of military compensation received on the line next to the box.
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I am living in another state while in the military. I maintain my Wisconsin residency, but my personal residence during the tax year is located outside Wisconsin. Can I use the rent I paid on my personal residence located outside Wisconsin to calculate the school property tax credit on my Wisconsin income tax return?
Yes, you can use the rent you paid on your principal home, even if it is located outside Wisconsin, to calculate the school property tax credit. However, you may
not use rent paid for housing that is exempt from property tax, such as military housing or certain university-owned housing.