Wisconsin has a progressive income tax with four brackets from 3.54% to 7.65%. The top rate of 7.65% applies to income above $374,600 (single) or $499,450 (married). Property taxes average a high 1.61%. Social Security is fully exempt. Wisconsin’s Manufacturing and Agriculture Credit effectively creates a near-zero income tax rate on qualifying manufacturing and agricultural income.
At a glance
Key Facts
State Income Tax
Progressive 3.54–7.65%; four brackets; top rate 7.65% on income above $374,600 (single) / $499,450 (married)
Capital Gains Tax
Taxed as ordinary income at 3.54–7.65%; 30% exclusion available for Wisconsin-sourced business asset gains (limited application)
Property Tax
Effective average ~1.61% — among the higher rates nationally; school funding drives local levies
Sales Tax
5% state + 0.5% county in most counties = 5.5% combined; Milwaukee County 5.6%; modest by national standards
Social Security and Military Retirement
Social Security fully exempt; military retirement fully exempt since 2022; government pensions generally taxable
Manufacturing and Agriculture Credit
Reduces effective income tax rate on qualifying manufacturing/agricultural income to near 0% — major competitive advantage
Estate and Inheritance Tax
None — Wisconsin repealed its estate tax in 2008; no inheritance tax
Introduction
Wisconsin is a high-tax state in some respects and surprisingly favorable in others. The top income tax rate of 7.65% is among the higher rates in the Midwest, and property taxes averaging 1.61% are well above the national average — a reflection of Wisconsin’s strong tradition of local government funding through property levies and the high cost of school district funding. For many Wisconsin homeowners, property tax is the single largest state/local tax they pay.
However, Wisconsin has made meaningful pro-growth tax policy decisions. The state repealed its estate tax in 2008. Social Security income is fully exempt from Wisconsin income tax. Most importantly, Wisconsin’s Manufacturing and Agriculture Credit (MAC) creates an effective near-zero income tax rate for qualifying manufacturers and agricultural businesses — making Wisconsin surprisingly competitive for production-based businesses despite its high headline income tax rates.
This guide covers everything Wisconsin residents and prospective movers need to know about the 2026 tax landscape: the progressive income tax brackets, capital gains treatment, the high property tax environment, sales tax, retirement income rules, and how Wisconsin’s manufacturing credit reshapes its competitive position.
Section 01
Wisconsin’s Progressive Income Tax: Brackets, Capital Gains, and the Real Burden
Wisconsin’s income tax system uses four progressive brackets. Unlike states with simple flat rates, Wisconsin’s system means that the effective rate you pay depends significantly on your income level and filing status.
Wisconsin Income Tax Brackets (2026)
Taxable Income (Single)
Taxable Income (Married Filing Jointly)
Rate
$0 – $14,320
$0 – $19,090
3.54%
$14,321 – $28,640
$19,091 – $38,190
4.65%
$28,641 – $374,600
$38,191 – $499,450
5.30%
Over $374,600
Over $499,450
7.65%
For most middle-income Wisconsin earners, the effective rate sits in the 5.30% bracket, which is reasonably competitive with neighboring states. The top rate of 7.65% kicks in at relatively high income levels compared to some states with lower thresholds for top rates.
How Wisconsin Compares to Neighboring States
State
Income Tax Structure
Rate at $100,000 (approx effective)
Wisconsin
Progressive 3.54–7.65%
~5.3%
Illinois
4.95% flat
4.95%
Minnesota
Progressive 5.35–9.85%
~7%
Iowa
3.8% flat (effective 2025)
~3.8%
Michigan
4.25% flat
4.25%
Capital Gains Treatment
Wisconsin taxes capital gains as ordinary income — the same 3.54–7.65% progressive rates apply. There is no preferential capital gains rate at the state level as exists federally (0%, 15%, 20%). Wisconsin does offer a 30% exclusion from capital gains on the sale of certain Wisconsin-based businesses and their assets, but this applies in limited circumstances and requires the assets to be Wisconsin-based business assets held for a qualifying period. For most capital gains — stocks, mutual funds, real estate, cryptocurrency — the full ordinary income rate applies.
This treatment makes Wisconsin notably less favorable than states like Florida, Texas, or Tennessee (zero income tax on capital gains) for investors with significant realized gains.
Section 02
Wisconsin Property Tax: One of the Higher Burdens Nationally
Why Wisconsin Property Taxes Are High
Wisconsin’s average effective property tax rate of approximately 1.61% is significantly above the national average of around 1.1%. The primary driver is school district funding. Wisconsin funds a large portion of K-12 education through local property tax levies, and school districts set levies based on spending needs minus state aid. When state aid falls short of local demand, property taxes rise. This structural dynamic has kept Wisconsin property taxes elevated for decades.
There is no single statewide property tax rate in Wisconsin — rates vary by municipality, county, school district, and other taxing jurisdictions. The state does impose a relatively small statewide school levy credit to partially offset school taxes on homeowners.
Property Tax Rates by Area
Area
Approximate Effective Rate
Annual Tax on $400,000 Home
Milwaukee
~2.17%
~$8,680
Madison (Dane County)
~1.72%
~$6,880
Green Bay (Brown County)
~1.55%
~$6,200
Appleton (Outagamie County)
~1.50%
~$6,000
Rural Wisconsin (avg)
~1.40%
~$5,600
Milwaukee stands out as one of the highest-tax cities in Wisconsin and in the Midwest. A $400,000 home in Milwaukee generating $8,680 in annual property tax compares to roughly $2,360 in Phoenix, Arizona, or $3,000 in Hamilton County, Indiana — stark differences that significantly affect the cost of homeownership.
Wisconsin vs National Property Tax Comparison
State
Average Effective Property Tax Rate
Wisconsin
~1.61%
National average
~1.10%
Illinois
~2.23%
New Jersey
~2.23%
Indiana
~0.85%
Tennessee
~0.71%
Wisconsin is not the highest nationally — Illinois, New Jersey, Connecticut, and New Hampshire all exceed it — but it is meaningfully above average and represents a significant cost for homeowners, particularly in urban areas.
Section 03
Manufacturing Credit, Sales Tax, Retirement Income, and No Estate Tax
Wisconsin’s Manufacturing and Agriculture Credit (MAC)
The Manufacturing and Agriculture Credit is one of Wisconsin’s most powerful tax incentives and is frequently underappreciated. The credit effectively reduces the Wisconsin income tax rate on qualifying manufacturing and agricultural income to near zero percent.
Here’s how it works:
Qualifying manufacturers and agricultural businesses can claim a credit equal to 7.5% of their net income from qualifying activities
Since Wisconsin’s top income tax rate is 7.65%, the 7.5% credit nearly offsets the entire income tax liability on that income
The result is an effective tax rate on qualifying manufacturing/agricultural income of approximately 0.15% or less
This makes Wisconsin significantly more competitive for manufacturing businesses than its headline 7.65% top rate suggests. A manufacturing company earning $5 million in Wisconsin income would ordinarily face up to $382,500 in Wisconsin income tax — but with the MAC, the actual liability would be closer to $7,500 to $10,000. This is why Wisconsin’s manufacturing sector remains robust despite other high-tax factors.
Sales Tax: Modest by National Standards
Wisconsin’s 5% state sales tax rate is below the national average state rate of approximately 5.6%. County governments may add up to 0.5%, bringing most areas to 5.5% combined. Milwaukee County adds 0.6% rather than the standard 0.5%, for a 5.6% combined rate. The total rates in Wisconsin are among the lower combined rates in the country, particularly compared to Tennessee (9.25–9.75%), Illinois (6.25%+local), or Indiana (7% flat).
Wisconsin exempts groceries from sales tax, prescription drugs, and many medical items. Clothing is generally taxable. Prepared food and restaurant meals are taxable.
Retirement Income: Social Security Exempt, Pensions Taxable
Social Security income: Fully exempt from Wisconsin income tax at all income levels — Wisconsin does not tax any SS benefits
Military retirement pay: Fully exempt from Wisconsin income tax since 2022 — a significant improvement that makes Wisconsin more competitive for military retirees
Wisconsin public employee pensions (WRS): Taxable as ordinary income at the regular rates; no blanket exemption for government pensions
Private pensions and IRA/401(k) distributions: Taxable as ordinary income
Federal civil service pensions: Taxable
Wisconsin is not a top retirement tax destination due to taxable pensions and high property taxes, but the Social Security exemption and military retirement exemption (since 2022) do provide meaningful relief for certain retirees.
No Estate Tax Since 2008
Wisconsin repealed its state estate tax effective January 1, 2008. For all deaths occurring after that date, no Wisconsin estate tax applies. This removes a significant obstacle for business owners, farmers, and families with illiquid assets (like farms and small businesses) who previously faced estate tax liability at death. Only the federal estate tax applies, with the 2026 exemption of $15M per individual (OBBBA — raised from $13.61M and made permanent).
Whether you’re a Wisconsin manufacturer looking to maximize the Manufacturing and Agriculture Credit, planning for high property tax costs, or navigating capital gains treatment, TaxHub connects you with licensed CPAs who specialize in Wisconsin tax strategy.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Wisconsin’s top income tax rate is 7.65%, applying to income above $374,600 for single filers and $499,450 for married filing jointly. Wisconsin has four progressive brackets starting at 3.54% on the lowest income tier. For most middle-income Wisconsin earners with income in the range of $28,641 to $374,600 (single), the marginal rate is 5.30%. The 7.65% top rate is among the higher rates in the Midwest but is partially offset by Wisconsin’s relatively high income thresholds for reaching the top bracket.
Q
Does Wisconsin tax capital gains?
Yes — Wisconsin taxes capital gains as ordinary income at the same progressive rates of 3.54–7.65%. Unlike federal tax law, Wisconsin does not provide a preferential lower rate for long-term capital gains. There is a limited 30% exclusion for gains from the sale of certain Wisconsin-based business assets, but this applies in narrow circumstances and is not available for most investment activity like stocks, funds, or real estate. Wisconsin is not favorable for investors with large capital gains compared to zero-income-tax states like Florida or Tennessee.
Q
Why are Wisconsin property taxes so high?
Wisconsin’s property taxes average approximately 1.61% — significantly above the national average of ~1.1%. The primary driver is K-12 school funding, which relies heavily on local property tax levies in Wisconsin. School districts set levies based on their budget needs minus state aid, and when state aid is insufficient, property taxes rise to compensate. Milwaukee is particularly high at around 2.17%. This structural feature of Wisconsin’s school funding system has kept property taxes elevated compared to states that fund education more through state income or sales tax revenues.
Q
Does Wisconsin tax Social Security income?
No — Social Security benefits are fully exempt from Wisconsin income tax at all income levels. This is a significant benefit for retirees and differs from states like Minnesota, which taxes Social Security at higher incomes. Wisconsin also fully exempts military retirement pay since 2022. However, most other pension income (Wisconsin public pensions, private pensions, IRA/401(k) distributions) is taxable as ordinary income in Wisconsin, which limits its attractiveness as a retirement destination compared to truly pension-friendly states.
Q
What is Wisconsin’s Manufacturing and Agriculture Credit?
The Manufacturing and Agriculture Credit (MAC) is a Wisconsin tax credit that effectively reduces the state income tax rate on qualifying manufacturing and agricultural income to near zero. The credit equals 7.5% of net income from qualifying activities — nearly offsetting Wisconsin’s top income tax rate of 7.65%. A manufacturer earning $1 million in Wisconsin might ordinarily owe $76,500 in state income tax; with the MAC, the actual liability could be as low as $1,500. This makes Wisconsin significantly more competitive for manufacturing businesses than the headline income tax rates suggest.
Q
Does Wisconsin have an estate tax?
No — Wisconsin repealed its state estate tax effective January 1, 2008. All Wisconsin residents who die on or after that date have no Wisconsin estate tax liability regardless of the size of their estate. Only the federal estate tax applies, with the 2026 exemption of $15M per individual (OBBBA — raised from $13.61M and made permanent). This repeal is particularly significant for Wisconsin’s agricultural community, where farms often represent substantial asset values that could previously trigger estate tax liability at death, forcing families to sell farmland to pay the tax.
Q
How does Wisconsin’s sales tax compare to neighboring states?
Wisconsin’s 5% state sales tax is below the national average and lower than most neighboring states. Most Wisconsin areas pay 5.5% combined (5% state + 0.5% county), with Milwaukee County at 5.6%. Compare this to Illinois at 6.25% state (plus high local additions reaching 10%+ in Chicago), Indiana at 7% flat, or Minnesota at 6.875% state. Wisconsin’s moderate sales tax is one of its relative competitive advantages against Midwestern neighbors, particularly combined with the grocery exemption.
Q
Is Wisconsin a good state for retirees?
Wisconsin offers a mixed picture for retirees. Positives: Social Security fully exempt, military retirement exempt since 2022, no estate tax, and moderate sales taxes. Negatives: high property taxes (averaging 1.61%) increase the cost of homeownership significantly, most pension and IRA income is fully taxable at rates up to 7.65%, and the overall income tax burden is relatively high compared to no-income-tax states. Wisconsin tends to be chosen by retirees who want to remain close to family and community rather than those optimizing purely for retirement tax efficiency. States like Florida, Tennessee, or Arizona typically offer better tax outcomes for retirement income.
Disclaimer:This guide provides general tax information for educational purposes only. Wisconsin tax rates and rules change regularly. Property tax rates vary significantly by municipality and school district. The Manufacturing and Agriculture Credit has specific qualifying criteria. Always consult a qualified tax professional before making significant tax decisions.