Fixing Federal Pension Tax
2017 Assembly Bill 1023
This legislation exempts retirement payments received by an individual from the U.S. Civil Service Retirement System or the Federal Employees Retirement System from state income tax.
In Wisconsin, Social Security annuities are tax exempt, while federal civil service payments are only exempt if the individual retired before 1/1/1964. Federal retirees are eligible for a partial exemption on $5000 of their federal retirement income, if their adjusted gross income is less than $15,000 filing single or $30,000 filing jointly.
Wisconsin retirees look at neighboring states and wonder why Wisconsin does not treat federal benefits more favorably. Illinois totally exempts federal civil service annuities from taxation; Iowa recently passed legislation that exempts $6,000 single/$12,000 of civil service annuities of those age 55 and older; Minnesota provides for some subtraction of income for those over age 65; and Michigan provides tax exemption for those civil service employees born before 1946.
Click here to view the status of this legislation.