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20 August 2025

Wisconsin law provides middle-income tax cuts and retirement income tax relief retroactive to January 1, 2025

On July 3, 2025, Wisconsin Governor Tommy Evers signed the state's budget bill, officially known as 2025 Wisconsin Act 15 (SB 45), which includes an income tax cut for middle-income individuals and income tax relief on retirement income. (Wisconsin Tax Bulletin, July 2025, Number 230.)

Individual income tax cuts

Effective retroactive to January 1, 2025, Act 15 expands the second-lowest tax rate of 4.4% to single filers earning up to $50,480 and married couples filing jointly up to $67,300. Previously, the 4.4% tax rate applied to single filers earning between $14,320 and $28,640 and married couples filing jointly earning between $19,090 and $38,190.

Governor Evers states that Act 15 will result in average savings of $180 per year for Wisconsin taxpayers. (Act 15 veto message.)

The last individual tax cut was enacted in 2021, which effective January 1, 2021, lowered the third tax bracket rate from 6.27% to 5.3%. (A.B. 68.)

Individual income tax relief on retirement income

Effective retroactive to January 1, 2025, taxpayers who are 67 or older at the end of the tax year may subtract up to $24,000 of eligible retirement income from Wisconsin taxable earnings. If a married couple files a joint return and both spouses are 67 or older at the end of the tax year, the couple may subtract up to $48,000 of eligible retirement income from Wisconsin taxable earnings.

Eligible retirement income includes payments from qualified retirement plans and Individual Retirement Arrangements that are not excluded from Wisconsin income under a separate provision of federal or Wisconsin law.

Ernst & Young LLP insights

The updated wage-bracket amounts for single filers will also apply when using the supplemental method of withholding on noncash wages and periodic payments. Note that the tax rates used under the supplemental method of withholding are higher than the tax code for the first two tax brackets (i.e., 3.54% vs. 3.5% and 4.65% vs. 4.4%.) (See Pub. 166, p. 26.)

Once available, the updated withholding formula and tables will be published here.

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Workforce Tax Services - Employment Tax Advisory Services

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor

Document ID: 2025-1727

 

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