Wis. Stat. § 71.05 — WI Code / Chapter 71 / Section 71.05
Income computation.
Status: in_force

(1) Exempt and excludable income. There shall be exempt from taxation under this subchapter the following:

(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.

(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) .

(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) or (am) .

(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.

(c) Certain interest income. Interest received on bonds or notes issued by any of the following:

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) .

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.

3. A local exposition district created under subch. II of ch. 229 .

4. A local professional baseball park district created under subch. III of ch. 229 .

5. A local professional football stadium district created under subch. IV of ch. 229 .

6. A local cultural arts district created under subch. V of ch. 229 .

6p. A sponsoring municipality borrowing to assist a local exposition district created under subch. II of ch. 229 .

7. The Wisconsin Aerospace Authority.

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.

10. A commission created under s. 66.0304 , if any of the following applies:

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.

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.

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 .

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.

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) .

13. An entity described under, or an entity whose bonds are issued under, s. 66.1201 , 66.1333 , or 66.1335 .

14. The Wisconsin Health and Educational Facilities Authority under s. 231.03 (6) , if the bonds or notes are issued in an amount totaling $35,000,000 or less, and to the extent that the interest income received is not otherwise exempt under this subsection.

(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) .

(g) Income from work performed during a declared state of emergency. Income of an out-of-state business, as defined in s. 323.12 (5) (a) 6. , and an out-of-state employee, as defined in s. 323.12 (5) (a) 7. , from disaster relief work, as defined under s. 323.12 (5) (a) 3.

(h) Wisconsin allocations from the federal coronavirus relief fund. Income received in the form of allocations issued by this state with moneys received from the coronavirus relief fund authorized under 42 USC 801 to be used for any of the following purposes:

1. Broadband expansion.

2. Privately owned movie theater grants.

3. A nonprofit grant program.

4. A tourism grants program.

5. A cultural organization grant program.

6. Music and performance venue grants.

7. Lodging industry grants.

8. Low-income home energy assistance.

9. A rental assistance program.

10. Supplemental child care grants.

11. A food insecurity initiative.

12. A farm support program.

13. Grants to small businesses.

14. Ethanol industry assistance.

15. Wisconsin Eye.

(hn) Wisconsin grants awarded during and related to the pandemic. Income received in the form of a grant issued by the Wisconsin Economic Development Corporation during and related to the COVID-19 pandemic under the ethnic minority emergency grant program. Amounts otherwise deductible under this chapter that are paid directly or indirectly with the grant money are deductible.

(hp) Grants from the federal restaurant revitalization fund. Income received in the form of a grant from the restaurant revitalization fund under section 5003 of the federal American Rescue Plan Act of 2021, P.L. 117-2 . Amounts otherwise deductible under this chapter that are paid directly or indirectly with the grant money are deductible. Amounts excluded under this paragraph by a tax-option corporation or partnership shall be treated as tax-exempt income for purposes of sections 705 and 1366 of the Internal Revenue Code.

(i) Commercial loans. Income of a tax-option corporation that is a financial institution, as defined in s. 69.30 (1) (b) , including interest, fees, and penalties, derived from a commercial loan of five million dollars or less provided to a person residing or located in this state and used primarily for a business or agricultural purpose in this state.

(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.

(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.

(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.

(6) Modifications and transitional adjustments. Some of the modifications referred to in s. 71.01 (13) and (14) are:

(a) Additions. To federal adjusted gross income add:

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 .

2. Losses not allocable or apportionable to this state under s. 71.04 .

3. Any amount deducted as a capital loss carry-over from any taxable year prior to the 1965 taxable year.

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).

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.

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.

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).