Wisconsin 2026 Tax Changes — What Residents & Business Owners Must Know
On January 1, 2026, major federal tax changes begin as previous Tax Cuts and Jobs Act (TCJA) provisions expire and updated rules take effect under the One Big Beautiful Bill Act (OBBBA).
Wisconsin residents — who pay a progressive state income tax based on federal AGI — will feel these changes across federal, state, and local levels.
- W-2 earners in Milwaukee, Madison, Green Bay, Kenosha, Racine, Appleton
- Manufacturing, trades, and industrial workers
- Small business owners, contractors, LLCs, and S-Corps
- Agricultural and rural households
- Real estate investors and landlords
- Short-term rental (STR) hosts
- Families with children
- Retirees drawing taxable income
- Dual-income households
Below is the complete Wisconsin-focused breakdown of the 2026 tax changes.
Key 2026 Federal Changes Affecting Wisconsin
Standard Deduction Shrinks
TCJA’s increased standard deduction expires in 2026.
- Single: ~$8,300
- Married Filing Jointly: ~$16,600
- Head of Household: ~$12,400
Because Wisconsin begins state income tax calculations with federal AGI, this directly raises both federal and Wisconsin taxable income.
Federal Income Tax Brackets Increase
- 12% → 15%
- 22% → 28%
- 24% → 31%
- dual-income families
- manufacturing and trades workers
- teachers, nurses, and state workers
- service, retail, and logistics employees
- households earning $50K–$250K
Higher federal taxable income raises state income tax as well.
QBI Deduction Made Permanent Under OBBBA
OBBBA permanently preserved the 20% Qualified Business Income (QBI) deduction.
- LLC and S-Corp owners
- sole proprietors
- contractors
- freelancers
- certain rental operations
- new income thresholds
- SSTB phaseout adjustments
- stricter documentation requirements
Wisconsin does not apply a state-level QBI deduction.
QBI affects federal taxes only.
Child Tax Credit Shrinks
- The federal Child Tax Credit decreases from about $2,000
- To roughly $1,000 per child
- Refundability decreases
Families throughout Wisconsin — especially in Milwaukee, Madison, and Green Bay — will see smaller refunds.
Marriage Penalty Returns
TCJA marriage penalty relief expires in 2026.
- hit higher federal brackets sooner
- lose credit eligibility faster
- face increased federal AGI, raising Wisconsin state taxes
Wisconsin–Specific Tax Considerations
1. Wisconsin Uses Federal AGI for State Taxation
- reduced federal deductions
- increased federal taxable income
- lower federal credits
…all increase Wisconsin state income tax.
This will hit middle-income and dual-income households hardest.
2. Real Estate Investors & Rental Property Owners Will Be Affected
Wisconsin real estate markets — including Milwaukee, Madison, Appleton, Green Bay, and Lake Geneva regions — will be impacted by federal changes involving:
- capital gains
- depreciation
- recapture
- STR participation rules
- timing of property sales
Property values have risen across Wisconsin, increasing federal capital gains exposure.
3. STR Owners Must Prepare for Updated Federal Rules
- Lake Geneva
- Door County
- Wisconsin Dells
- Madison
- Milwaukee
- reduced bonus depreciation
- stricter participation tests
- updated safe harbor standards
- stronger documentation requirements
4. Agriculture & Rural Households Will Feel the Impact
Wisconsin’s agricultural sector — including dairy farms, grain operations, livestock farms, and rural businesses — will be affected by:
- equipment depreciation changes
- capital gains on land sales
- farm income averaging rules
- treatment of operating losses
- timing for large purchases or sales
5. Retirement Income Planning Is More Important Than Ever
Wisconsin taxes many forms of retirement income.
- IRA withdrawals
- pension income
- 401(k) distributions
- investment account withdrawals
Retirees across Wisconsin must plan proactively.
Who Is Most Affected in Wisconsin (2026)
- Dual-income households
- Contractors, trades, and manufacturing workers
- Small business owners and LLC/S-Corp operators
- Real estate investors and landlords
- STR hosts
- Agricultural and rural households
- Families with children
- Retirees drawing taxable income
- Middle-income earners
What Wisconsin Residents Should Do Before December 31, 2025
- Update federal and Wisconsin withholding
- Maximize retirement contributions
- Consider Roth conversions
- Review QBI eligibility and business structure
- Prepare STR and rental documentation
- Evaluate capital gains exposure
- Plan timing for property or equipment purchases
- Build a federal + state tax plan for 2025–2026
Wisconsin 2026 Tax FAQ
Does Wisconsin conform to QBI?
No. QBI is federal-only.
Will Wisconsin taxes increase?
Rates remain unchanged, but taxable income rises due to federal changes.
Are families affected?
Yes. Reduced credits and higher AGI reduce refunds.
Are STR owners impacted?
Yes. Participation and depreciation rules tighten in 2026.
Are retirees impacted?
Yes. Higher federal brackets increase the tax cost of withdrawals.
Get your 2026 Wisconsin Tax Strategy
Wisconsin residents face significant tax changes under the 2026 federal rules.
Reduced deductions, higher brackets, new business rules, and updated rental requirements make early planning essential.