71.04 Cross-reference
Cross-reference: See also s.
Tax 2.39, Wis. adm. code.
71.05
71.05
Income computation. 71.05(1)(1)
Exempt and excludable income. There shall be exempt from taxation under this subchapter the following:
71.05(1)(a)
(a)
Retirement systems. All payments received from the U.S. civil service retirement system, the U.S. military employee retirement system, the employee's retirement system of the city of Milwaukee, Milwaukee County employees' retirement system, sheriff's annuity and benefit fund of Milwaukee County, police officer's annuity and benefit fund of Milwaukee, fire fighter's annuity and benefit fund of Milwaukee, or the public employee trust fund as successor to the Milwaukee public school teachers' annuity and retirement fund and to the Wisconsin state teachers retirement system, which are paid on the account of any person who was a member of the paying or predecessor system or fund as of December 31, 1963, or was retired from any of the systems or funds as of December 31, 1963, but such exemption shall not exclude from gross income tax sheltered annuity benefits.
71.05 Cross-reference
Cross-reference: See also s.
Tax 2.94, Wis. adm. code.
71.05(1)(ae)
(ae)
Pension, individual retirement income. Except for a payment that is exempt under par.
(a),
(am), or
(an), or that is exempt as a railroad retirement benefit, for taxable years beginning after December 31, 2008, up to $5,000 of payments or distributions received each year by an individual from a qualified retirement plan under the Internal Revenue Code or from an individual retirement account established under
26 USC 408, if all of the following conditions apply:
71.05(1)(ae)1.
1. The individual is at least 65 years of age before the close of the taxable year to which the exemption claim relates.
71.05(1)(ae)2.
2. If the individual is single or files as head of household, his or her federal adjusted gross income in the year to which the exemption claim relates is less than $15,000.
71.05(1)(ae)3.
3. If the individual is married and is a joint filer, the couple's federal adjusted gross income in the year to which the exemption claim relates is less than $30,000.
71.05(1)(ae)4.
4. If the individual is married and files a separate return, the sum of both spouses' federal adjusted gross income in the year to which the exemption claim relates is less than $30,000.
71.05(1)(am)
(am)
Military retirement systems. All retirement payments received from the U.S. military employee retirement system, to the extent that such payments are not exempt under par.
(a) or
(ae).
71.05(1)(an)
(an)
Uniformed services retirement benefits. All retirement payments received from the U.S. government that relate to service with the coast guard, the commissioned corps of the national oceanic and atmospheric administration, or the commissioned corps of the public health service, to the extent that such payments are not exempt under par.
(a),
(ae), or
(am).
71.05(1)(b)
(b)
State legislature allowance for expenses. All amounts received in accordance with s.
13.123 (1) (a) which are spent for the purposes specified in s.
13.123 (1) (a) if the person does not claim a deduction for travel expenses away from home on legislative days. In this chapter, the place of residence of a member of the state legislature within the legislative district which the member represents shall be considered the member's home.
71.05(1)(c)
(c)
Certain interest income. Interest received on bonds or notes issued by any of the following:
71.05(1)(c)1.
1. The Wisconsin Housing and Economic Development Authority under s.
234.65, if the bonds are used to fund an economic development loan to finance construction, renovation, or development of property that would be exempt under s.
70.11 (36).
71.05(1)(c)1m.
1m. The Wisconsin Housing and Economic Development Authority under s.
234.08 or
234.61, on or after January 1, 2004, if the bonds or notes are issued to fund multifamily affordable housing projects or elderly housing projects.
71.05(1)(c)8.
8. The Wisconsin Health and Educational Facilities Authority under s.
231.03 (6), on or after October 27, 2007, if the proceeds from the bonds or notes that are issued are used by a health facility, as defined in s.
231.01 (5), to fund the acquisition of information technology hardware or software.
71.05(1)(c)10.a.
a. The bonds or notes are used to fund multifamily affordable housing projects or elderly housing projects in this state, and the Wisconsin Housing and Economic Development Authority has the authority to issue its bonds or notes for the project being funded.
71.05(1)(c)10.b.
b. The bonds or notes are used by a health facility, as defined in s.
231.01 (5), to fund the acquisition of information technology hardware or software, in this state, and the Wisconsin Health and Educational Facilities Authority has the authority to issue its bonds or notes for the project being funded.
71.05(1)(c)10.c.
c. The bonds or notes are issued to fund a redevelopment project in this state or a housing project in this state, and the authority exists for bonds or notes to be issued by an entity described under s.
66.1201,
66.1333, or
66.1335.
71.05(1)(c)11.
11. The Wisconsin Health and Educational Facilities Authority under s.
231.03 (6), if the bonds or notes are issued for the benefit of a person who is eligible to receive the proceeds of bonds or notes from another entity for the same purpose for which the bonds or notes are issued under s.
231.03 (6) and the interest income received from the other bonds or notes is exempt from taxation under this subchapter.
71.05(1)(c)12.
12. The Wisconsin Housing and Economic Development Authority, if the bonds or notes are issued to provide loans to a public affairs network under s.
234.75 (4).
71.05(1)(f)
(f)
Income from the sales of certain insurance policies. Income received by the original policyholder or original certificate holder who has a catastrophic or life-threatening illness or condition from the sale of a life insurance policy or certificate, or the sale of the death benefit under a life insurance policy or certificate, under a life settlement contract, as defined in s.
632.69 (1) (k). In this paragraph, “catastrophic or life-threatening illness or condition" includes AIDS, as defined in s.
49.686 (1) (a), and HIV infection, as defined in s.
49.686 (1) (d).
71.05(2)
(2) Nonresident reciprocity. All payments received by natural persons domiciled outside Wisconsin who derive income from the performance of personal services in Wisconsin shall be excluded from Wisconsin gross income to the extent that it is subjected to an income tax imposed by the state of domicile; provided that the law of the state of domicile allows a similar exclusion of income from personal services earned in such state by natural persons domiciled in Wisconsin, or a credit against the tax imposed by such state on such income equal to the Wisconsin tax on such income.
71.05 Cross-reference
Cross-reference: See also s.
Tax 2.02, Wis. adm. code.
71.05(3)
(3) Menominee Indian tribe; distribution of assets. No distribution of assets from the United States to the members of the Menominee Indian tribe as defined in s.
49.385 or their lawful distributees, or to any corporation, or organization, created by the tribe or at its direction pursuant to section 8, P.L.
83-399, as amended, and no issuance of stocks, bonds, certificates of indebtedness, voting trust certificates or other securities by any such corporation or organization, or voting trust, to such members of the tribe or their lawful distributees shall be subject to income taxes under this chapter; provided, that so much of any cash distribution made under said P.L.
83-399 as consists of a share of any interest earned on funds deposited in the treasury of the United States pursuant to the supplemental appropriation act, 1952, (65 Stat. 736, 754) shall not by virtue of this subsection be exempt from the individual income tax of this state in the hands of the recipients for the year in which paid. For the purpose of ascertaining the gain or loss resulting from the sale or other disposition of such assets and stocks, bonds, certificates of indebtedness and other securities under this chapter, the fair market value of such property, on termination date as defined in s.
70.057 (1), 1967 stats., shall be the basis for determining the amount of such gain or loss.
71.05(5)
(5) Fractional year. When an income tax return is required to be filed for a fractional part of a year under s.
71.03 (3), the Wisconsin taxable income shall be placed on an annual basis using the method applicable for federal income taxes under section
443 (b) (1) of the internal revenue code.
71.05(6)
(6) Modifications and transitional adjustments. Some of the modifications referred to in s.
71.01 (13) and
(14) are:
71.05(6)(a)
(a)
Additions. To federal adjusted gross income add:
71.05(6)(a)1.
1. The amount of any interest, except interest under par.
(b) 1., less related expenses, which is not included in federal adjusted gross income, and except the amount of any interest or original issue discount derived from bonds issued under subch.
IV of ch. 18.
71.05 Cross-reference
Cross-reference: See also s.
Tax 3.095, Wis. adm. code.
71.05(6)(a)3.
3. Any amount deducted as a capital loss carry-over from any taxable year prior to the 1965 taxable year.
71.05(6)(a)4.
4. The amount of any lump sum distribution taxable under section
402 (d) (1) of the internal revenue code (relating to distributions from employee benefit plans).
71.05(6)(a)5.
5. Any amount deducted as a capital loss carry-over from any taxable year prior to the 1975 taxable year if the capital asset which generated the loss had a situs outside of Wisconsin.
71.05(6)(a)6.
6. Any amount received in taxable year 1979 or thereafter by a Wisconsin resident shareholder as a proportionate share of the earnings and profits of a tax-option corporation which was accumulated prior to the beginning of its 1979 taxable year and not considered a dividend when received under section
1375 (d) (1) of the internal revenue code as amended to December 31, 1978.
71.05(6)(a)7.
7. Any amount deducted under section
170 (i) of the internal revenue code (relating to the deduction of charitable contributions by individuals who do not itemize deductions).
71.05(6)(a)9.
9. Any amount excluded from adjusted gross income under section
641 (c) (1) of the internal revenue code (relating to gain on the sale of any property by a trust within 2 years of acquisition).
71.05(6)(a)10.
10. For taxable years beginning before January 1, 2014, for a person who is not “actively engaged in farming," as that term is used in
7 CFR 1400.201, combined net losses, exclusive of net gains from the sale or exchange of capital or business assets and exclusive of net profits, from businesses, from rents, from partnerships, from limited liability companies, from S corporations, from estates, or from trusts, under section
165 of the Internal Revenue Code, except losses allowable under sections
1211 and
1231 of the Internal Revenue Code, otherwise includable in calculating Wisconsin income if those losses are incurred in the operation of a farming business, as defined in section
464 (e)
1. of the Internal Revenue Code to the extent that those combined net losses exceed $20,000 if nonfarm Wisconsin adjusted gross income exceeds $55,000 but does not exceed $75,000, exceed $17,500 if nonfarm Wisconsin adjusted gross income exceeds $75,000 but does not exceed $100,000, exceed $15,000 if nonfarm Wisconsin adjusted gross income exceeds $100,000 but does not exceed $150,000, exceed $12,500 if nonfarm Wisconsin adjusted gross income exceeds $150,000 but does not exceed $200,000, exceed $10,000 if nonfarm Wisconsin adjusted gross income exceeds $200,000 but does not exceed $250,000, exceed $7,500 if nonfarm Wisconsin adjusted gross income exceeds $250,000 but does not exceed $300,000, exceed $5,000 if nonfarm Wisconsin adjusted gross income exceeds $300,000 but does not exceed $600,000, and exceed $0 if nonfarm adjusted gross income exceeds $600,000, except that the amounts applicable to married persons filing separately are 50 percent of the amounts specified in this subdivision.
71.05(6)(a)12.
12. All penalties for early withdrawals from time savings accounts and deposits deducted for federal income tax purposes and paid while the individual charged with the penalty was a nonresident of this state; all reforestation expenses related to property not in this state, deducted for federal income tax purposes and paid while the individual paying the expense was not a resident of this state; all contributions to individual retirement accounts, simplified employee pension plans and self-employment retirement plans and all deductible employee contributions, deducted for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual's wages and net earnings from a trade or business taxable by this state and the denominator of which is the individual's total wages and net earnings from a trade or business; the contributions to a Keogh plan deducted for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual's net earnings from a trade or business, taxable by this state, and the denominator of which is the individual's total net earnings from a trade or business; the amount of health insurance costs of self-employed individuals deducted under section
162 (L) of the internal revenue code for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual's net earnings from a trade or business, taxable by this state, and the denominator of which is the individual's total net earnings from a trade or business; and the amount of self-employment taxes deducted under section
164 (f) of the internal revenue code for federal income tax purposes and in excess of that amount multiplied by a fraction the numerator of which is the individual's net earnings from a trade or business, taxable by this state, and the denominator of which is the individual's total net earnings from a trade or a business.
71.05(6)(a)13.
13. The amount claimed by a fiduciary as an itemized deduction under section
164 or
216 (a) (1) of the internal revenue code on the federal fiduciary return.
71.05(6)(a)14.
14. Any amount received as a proportionate share of the earnings and profits of a corporation that is an S corporation for federal income tax purposes if those earnings and profits accumulated during a year for which the shareholders have elected under s.
71.365 (4) (a) not to be a tax-option corporation, to the extent not included in federal adjusted gross income for the current year. This subdivision does not apply to earnings and profits accumulated during a year for which a tax-option corporation has made an election under s.
71.365 (4m) (a) to be taxed at the entity level.
71.05(6)(a)15.
15. Except as provided under s.
71.07 (3p) (c) 5., the amount of the credits computed under s.
71.07 (2dm),
(2dx),
(2dy),
(3g),
(3h),
(3n),
(3p),
(3q),
(3r),
(3rm),
(3rn),
(3s),
(3t),
(3w),
(3wm),
(3y),
(4k),
(4n),
(5e),
(5f),
(5h),
(5i),
(5j),
(5k),
(5r),
(5rm),
(6n),
(8r), and
(10) and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s.
71.21 (4) or
71.34 (1k) (g).
71.05(6)(a)16.
16. Any amount recognized as a loss under section
1001 (c) of the Internal Revenue Code if a surviving spouse and a distributee exchange their interests in marital property under s.
766.31 (3) (b).
71.05(6)(a)18.
18. Any amount deducted as moving expenses under section
217 of the internal revenue code if the expense relates to a move made by an individual who changes his or her domicile from this state as a result of the move or if the expense relates to a move made by an individual who is not domiciled in this state as a result of the move.
71.05(6)(a)20.
20. The amount of any excess distribution, as that term is used in section
1291 (b) of the Internal Revenue Code, from a passive foreign investment company.
71.05(6)(a)21.
21. For taxable years beginning after December 31, 2007, and before January 1, 2009, any amount deducted as income attributable to domestic production activities under section
199 of the Internal Revenue Code if the individual claiming the deduction is a nonresident or part-year resident of this state and if the domestic production activities income is not attributable to a trade or business that is taxable by this state.
71.05(6)(a)22.
22. For taxable years beginning after December 31, 2007, and before January 1, 2009, if an individual is a nonresident or part-year resident of this state and a portion of the amount the individual deducted as income attributable to domestic production activities under section
199 of the Internal Revenue Code is attributable to a trade or business that is taxable by this state, the amount deducted under section 199 for federal income tax purposes and in excess of that amount, multiplied by a fraction, the numerator of which is the individual's net earnings from the trade or business that is taxable by this state and the denominator of which is the individual's total net earnings from the trade or business to which the deduction under section
199 of the Internal Revenue Code applies.
71.05(6)(a)23.
23. Any amount deducted by an individual under section
62 (a) (20) of the Internal Revenue Code related to attorney fees or court costs, involving an unlawful discrimination claim, if the individual is a nonresident or part-year resident of this state and if the judgment or settlement resulting from the claim is not taxable by this state.
71.05(6)(a)24.
24. The amount deducted or excluded under the Internal Revenue Code for interest expenses, rental expenses, intangible expenses, and management fees that are directly or indirectly paid, accrued, or incurred to, or in connection directly or indirectly with one or more direct or indirect transactions with, one or more related entities.
71.05(6)(a)25.
25. The amount computed under s.
71.07 (5n) in the previous taxable year and not passed through by a partnership, limited liability company, or tax-option corporation that has added that amount to the partnership's, company's, or tax-option corporation's income under s.
71.21 (4) (a) or
71.34 (1k) (m) and not included in federal adjusted gross income.
71.05(6)(a)26.
26. For the taxable year in which a distribution is received, all of the following amounts distributed from a college savings account, as described in s.
224.50:
71.05(6)(a)26.a.
a. To the extent that the receipt of such amounts by the owner or beneficiary of the account results in a penalty as provided in
26 USC 529 (c) (6), any amount that was not used for qualified higher education expenses, as that term is defined in
26 USC 529 (e) (3), and was contributed to the account after December 31, 2013, except that this subd.
26. a. applies only to amounts for which a subtraction was made under par.
(b) 32. 71.05(6)(a)26.b.
b. Any amount rolled over by an owner into another state's qualified tuition program, as described in
26 USC 529 (c) (3) (C) (i), to the extent that the amount was previously claimed as a deduction under par.
(b) 32. 71.05(6)(a)26.c.
c. To the extent that an amount is not otherwise added back under this subdivision, any amount withdrawn from a college savings account, as described in s.
224.50, for any purpose if the withdrawn amount was contributed to the account within 365 days of the day on which the amount was withdrawn from such an account and if the withdrawn amount was previously subtracted under par.
(b) 32. 71.05(6)(a)27.
27. Except as provided in subd.
28., to the extent that an amount is not included in federal adjusted gross income, any amount withdrawn from a qualified ABLE account described under section
529A (b) (1) of the Internal Revenue Code for any reason other than the payment of qualified disability expenses, as defined in section
529A (e) (5) of the Internal Revenue Code, for the account beneficiary.
71.05(6)(a)28.
28. Upon the termination of an account as described under s.
16.643, any amount in the account that is returned to an account owner's estate.
71.05(6)(b)
(b)
Subtractions. From federal adjusted gross income subtract to the extent included in federal taxable or adjusted gross income unless the modification is an item, other than a capital gain deduction under s.
71.36 or interest on U.S. obligations, that is passed through to an individual from a tax-option corporation and would be included in that corporation's income if it were not a tax-option corporation:
71.05(6)(b)1.
1. The amount of any interest or dividend income which is by federal law exempt from taxation by this state less the related expense in regard to both the distributable and nondistributable interest and dividend income on a fiduciary return.
71.05 Cross-reference
Cross-reference: See also ss.
Tax 3.095 and
3.096, Wis. adm. code.
71.05(6)(b)3.
3. Any other amount not subject to taxation under this chapter, less any amount allocable thereto which has been deducted in the computation of federal taxable or adjusted gross income except amounts used to calculate the credit under s.
71.07 (5).
71.05 Cross-reference
Cross-reference: See also s.
Tax 3.098, Wis. adm. code.
71.05(6)(b)4.
4. Disability payments other than disability payments that are paid from a retirement plan, the payments from which are exempt under sub.
(1) (ae),
(am), and
(an), if the individual either is single or is married and files a joint return, to the extent those payments are excludable under section
105 (d) of the Internal Revenue Code as it existed immediately prior to its repeal in 1983 by section 122 (b) of P.L.
98-21, except that if an individual is divorced during the taxable year that individual may subtract an amount only if that person is disabled and the amount that may be subtracted then is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less. If the exclusion under this subdivision is claimed on a joint return and only one of the spouses is disabled, the maximum exclusion is $100 for each week that payments are received or the amount of disability pay reported as income, whichever is less.
71.05(6)(b)5.
5. Any amounts that are recoveries of federal itemized deductions for which no tax benefit was received for Wisconsin purposes.
71.05(6)(b)6.
6. For the original purchaser of small business stock that is purchased at the time that the business is incorporated and before January 1, 2014, and that is sold before January 1, 2014, the amount of net capital gains on small business stock otherwise subject to the tax under s.
71.02 if the taxpayer has not acquired the stock by gift, has not acquired the stock in a stock-for-stock exchange and submits with the taxpayer's return a copy of the certification under s.
71.01 (10).
71.05(6)(b)8.
8. The difference between the amount included in federal adjusted gross income for the current year and the amount calculated under section
85 of the internal revenue code (relating to unemployment compensation) as that section existed on December 31, 1985.
71.05(6)(b)9.
9. On assets held more than one year and on all assets acquired from a decedent, 30 percent of the capital gain as computed under the internal revenue code, not including capital gains for which the federal tax treatment is determined under section 406 of P.L.
99-514; not including amounts treated as ordinary income for federal income tax purposes because of the recapture of depreciation or any other reason; and not including amounts treated as capital gain for federal income tax purposes from the sale or exchange of a lottery prize. For purposes of this subdivision, the capital gains and capital losses for all assets shall be netted before application of the percentage.
71.05(6)(b)9m.
9m. On farm assets held more than one year and on all farm assets acquired from a decedent, to the extent that they are not subtracted under subd.
9. or
10., 60 percent of the capital gain as computed under the Internal Revenue Code, not including capital gains for which the federal tax treatment is determined under section 406 of P.L.
99-514; not including amounts treated as ordinary income for federal income tax purposes because of the recapture of depreciation or any other reason; and not including amounts treated as capital gain for federal income tax purposes from the sale or exchange of a lottery prize. In this subdivision, “farm assets" means livestock, farm equipment, farm real property, and farm depreciable property. For purposes of this subdivision, the capital gains and capital losses for all assets shall be netted before application of the percentage.
71.05(6)(b)10.
10. Farm losses added to income under par.
(a) 10. in any of the 15 preceding years, to the extent that they are not offset against farm income of any year between the loss year and the taxable year for which the modification under this subdivision is claimed and to the extent that they do not exceed the net profits or net gains from the sale or exchange of capital or business assets in the current taxable year from the same farming business or portion of that business to which the limits on deductible farm losses under par.
(a) 10. applied in the loss year.
71.05(6)(b)12.
12. Any amount recognized as a gain under section
1001 (c) of the Internal Revenue Code if a surviving spouse and a distributee exchange their interests in marital property under s.
766.31 (3) (b).
71.05(6)(b)13.
13. Any amount of basic, special and incentive pay income or compensation, as those terms are used in
37 USC chapters 3 and
5, received from the federal government by a person who is a member of a reserve component of the U.S. armed forces, as defined in
26 USC 7701 (a) (15), and is below the grade of commissioned officer, for services performed for Operation Desert Shield or Operation Desert Storm. In this subdivision, “services performed for Operation Desert Shield or Operation Desert Storm" means service in a unit of the U.S. armed forces if:
71.05(6)(b)13.a.
a. The person is activated for Operation Desert Shield or Operation Desert Storm; and
71.05(6)(b)13.b.
b. The service occurs during the period that there is in effect a designation by the president of the United States that the service is part of Operation Desert Shield or Operation Desert Storm.
71.05(6)(b)14.
14. Up to $500 per month of basic, special and incentive pay income or compensation, as those terms are used in
37 USC chapters 3 and
5, received from the federal government by a person who is a member of a reserve component of the U.S. armed forces, as defined in
26 USC 7701 (a) (15), and is a commissioned officer, for services performed for Operation Desert Shield or Operation Desert Storm. In this subdivision, “services performed for Operation Desert Shield or Operation Desert Storm" means service in a unit of the U.S. armed forces if:
71.05(6)(b)14.a.
a. The person is activated for Operation Desert Shield or Operation Desert Storm; and
71.05(6)(b)14.b.
b. The service occurs during the period that there is in effect a designation by the president of the United States that the service is part of Operation Desert Shield or Operation Desert Storm.
