Are IRA Withdrawals and RMDs Taxable in Wisconsin?
Are IRA Withdrawals and RMDs Taxable in Wisconsin?
In many cases, yes.
Traditional IRA withdrawals and required minimum distributions are generally taxable federally to the extent they consist of pre-tax money and earnings.
Because Wisconsin generally begins with federal income when calculating Wisconsin taxable income, these distributions will often affect your Wisconsin tax return as well.
But beginning in 2025, some Wisconsin retirees have a new opportunity to reduce the amount of retirement income subject to Wisconsin tax.
How Are Traditional IRA Withdrawals Taxed?
Traditional IRA distributions generally include taxable income unless part of the distribution represents nondeductible contributions or another amount that has already been taxed.
The same general rule applies to RMDs.
The IRS states that RMD withdrawals are generally included in taxable income except for previously taxed basis or amounts otherwise eligible for tax-free treatment.
When Do RMDs Begin?
Under current federal law, retirement-account owners generally must begin taking RMDs at age 73.
RMD rules generally apply to traditional IRAs, SEP IRAs, SIMPLE IRAs and many employer-sponsored retirement plans. Roth IRAs owned by the original account holder are not subject to lifetime RMD requirements.
Wisconsin's New Age-67 Retirement Subtraction
For tax years beginning with 2025, qualifying Wisconsin taxpayers age 67 or older may subtract up to $24,000 of qualifying retirement income.
If both spouses are at least 67 and file jointly, the maximum subtraction can reach $48,000.
And the Wisconsin Department of Revenue has specifically confirmed:
RMD income may qualify for the new retirement-income subtraction.
That creates an interesting planning opportunity.
A Wisconsin retiree could still have an RMD included in federal taxable income while potentially qualifying to subtract some or all of that eligible retirement income for Wisconsin purposes, subject to the annual limit.
Example
Suppose a 70-year-old Wisconsin taxpayer receives:
$35,000 of Social Security benefits, and
$20,000 from a traditional IRA.
Wisconsin does not tax the Social Security benefits.
If the taxpayer otherwise meets the requirements for Wisconsin's new age-67 retirement-income subtraction, the $20,000 IRA distribution may potentially fall within the $24,000 subtraction limit.
That does not mean the IRA distribution disappears from the federal tax return. Federal and Wisconsin treatment are separate.
Don't Forget the Credit Restriction
Taxpayers who claim Wisconsin's new retirement-income subtraction generally give up the ability to claim Wisconsin tax credits for that tax year.
That makes this a calculation worth doing rather than an automatic election.
RMD Planning Can Start Before RMDs
You do not have to wait until age 73 to start planning.
Years before RMDs begin may provide opportunities to evaluate:
Roth conversions,
strategic IRA withdrawals,
charitable giving,
Social Security timing, and
how future distributions may affect taxable income.
*Last updated: September 2026
