Thursday, April 3, 2008

Wisconsin Just Became a Little Less Taxing

On April 1, the Wisconsin Department of Revenue sent out a reminder that, as of January 1, 2008, Social Security benefits would no longer be subject to the Wisconsin Income Tax. While not effective until the beginning of this year, the law making this change was actually the 2005 Wisconsin Act 25.

Prior to 2008, Social Security benefits were taxable in Wisconsin for single taxpayers that received more than $25,000 in income in a given year or for joint filers whose income exceeded $32,000. Persons exceeding these thresholds would have 50% of their Social Security benefits taxed as income.

The recent Wisconsin Department of Revenue notice served as a reminder of the 2005 Act's provisions and stated:

"Effective for taxable years beginning in 2008, social security benefits will no longer be taxable for Wisconsin income tax purposes. This will be reflected on the 2008 Wisconsin income tax forms.

For federal income tax purposes, up to 85 percent of social security benefits may be taxable. Prior to 2008, if social security benefits were taxable on an individual’s federal income tax return, the social security benefits were also taxable on the individual’s Wisconsin income tax return. However, Wisconsin did not tax more than 50 percent of the benefits.

Individuals who previously had taxable social security benefits and make Wisconsin estimated tax payments may want to adjust their 2008 estimated tax payments to account for the fact that their social security benefits will not be taxed. Form 1-ES is used to make estimated tax payments. A worksheet is included in the 2008 Form 1-ES instructions for estimating 2008 taxable income. The Form 1-ES and instructions are available from the department’s website at

Note: Even though social security benefits will not be taxable for income tax purposes, they must still be included in household income for homestead credit. "

This change will only impact a certain segment of the Wisconsin taxpayers so its overall impact on the Wisconsin population at large, is limited. Yet, this is still good news for those receiving Social Security benefits.

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