TALKING CAPITAL IN THE CAPITAL. The 2025-27 state budget was signed in July, and at 190-plus pages, there's a lot to note. This writeup details a few tax-related shifts to know. (Photo via UW-Madison)

While the 2025-27 state budget totals more than 190 pages – and covers topics such as labor force projections, inflation’s impact on revenue, Medicaid, and more – there are some glaring changes taxpayers should be aware of, no matter which bracket you fall into.

At the same time Wisconsin Legislature was working to push its biennial budget through, the One Big Beautiful Bill Act (OBBBA) was also vying for – and received – congressional approval. While the OBBBA impacts federal tax laws as well, we chatted with Pat Erickson, signing director at the Eau Claire branch of CLA (CliftonLarsonAllen), about some of the specific state budget changes Wisconsinites should take note of.

Erickson pointed to three significant changes: Eligibility age requirements for retirement exclusion have increased, as have the exclusion amounts; deductions for adoption fees have increased; and the ridding of sales taxes for residential electricity and natural gas.

Retirement exclusions.

“Starting with tax year 2025, retirees that are age 67 prior to the end of the year are now eligible for an exclusion of up to $24,000 per individual (or $48,000 for married joint filters) for qualified retirement plan distributions,” Erickson stated. “The retirement exclusion had been up to $5,000 per individual with a federal adjusted gross income limit of $15,000, if single, and $30,000, if married.”

Eligibility age has increased from 65 to 67, which isn’t necessary a negative. “The new exclusion will be available to many more (Wisconsin) residents than under previous law,” Erickson noted.

For all Wisconsinites, as of Oct. 1, 2025, there will no longer be sales tax assessed on electricity and natural gas sold for residential consumption. To Erickson’s final point, adoption deductions have increased: the state tax deductions for adoption fees, court costs, and legal fees relating to the adoption of a child, have increased from $5,000 to $15,000 starting with the 2025 tax year.

Tax bracket threshold changes.

Notably, the new state budget has kept the same income tax brackets, but changed the amount of income that will be subject to each tax level.

Erickson said the most significant change is to the 4.4% tax bracket. The new budget has increased the top of the 4.4% tax bracket to $50,480 of taxable income for single taxpayers – up from the previous $28,640; and increased the top of the bracket to $67,300 for married taxpayers filing jointly – up from the previous $38,190.

Those changes largely equate to reduced income tax for all Wisconsin residents if their income is above $50,480 (single filer) or $67,300 (married joint filer). Erickson said single and married taxpayers should see roughly $200 of tax savings due to that change, if their income exceeds the top of the 4.4% tax bracket.

One-up for retirees.

Overall, the group of Wisconsinites to potentially benefit most from tax changes made in the latest state budget, is retirees.

“It’s hard to argue that the biggest beneficiary of the recently passed Wisconsin budget are those Wisconsin residents over 67,” Erickson said. “Under previous law, Wisconsin already excluded federally taxable Social Security benefits received. Adding in the much more favorable Wisconsin income exclusion (makes Wisconsin) a more attractive place for people to enjoy their retirement years as a resident of the state.”

So, there you have it; Those are some of the key highlights taxpayers should note moving forward. It wouldn’t hurt to touch base with your tax servicer or accountant about how the new budget may affect your finances. (If you don’t have a go-to person or service, you can probably swing into most local offices or your bank to be pointed in the right direction!)

Learn more about the 2025-27 state budget from The Wisconsin Policy Forum, a statewide nonpartisan, independent policy research organization, online.