How Much Is Capital Gains Tax in Wisconsin?

Capital gains tax applies to profits from selling assets. In Wisconsin, there is no separate capital gains tax; instead, these gains are treated as part of an individual’s regular income. They are subject to the state’s progressive income tax rates, though specific state provisions can modify the taxable amount.

Federal Capital Gains Tax Overview

Capital gains are determined and included in a taxpayer’s Adjusted Gross Income (AGI) at the federal level. A capital gain is the profit from selling an asset, such as stocks, bonds, real estate, or other investments, for more than its purchase price. These gains are categorized based on the holding period of the asset.

Assets held for one year or less result in short-term capital gains, which are taxed at ordinary federal income tax rates. Conversely, assets held for more than one year yield long-term capital gains, which typically qualify for preferential federal tax rates of 0%, 15%, or 20%, depending on the taxpayer’s overall income level. These federal capital gains calculations contribute to the federal AGI, which serves as the starting point for Wisconsin income tax calculations.

Wisconsin Income Tax Rates and Capital Gains

Wisconsin does not impose a distinct capital gains tax, meaning capital gains included in federal AGI are generally treated as ordinary income for state tax purposes. These amounts are then subjected to Wisconsin’s progressive income tax rates. For the 2024 tax year, Wisconsin’s individual income tax rates vary depending on filing status and income levels.

For single filers and heads of household, the 2024 rates are 3.50% for income up to $14,320, and 7.65% for income exceeding $315,310. Married couples filing jointly have different brackets, with rates starting at 3.50% for income up to $19,090 and reaching 7.65% for income above $420,420. The preferential federal rates for long-term capital gains do not directly apply at the state level in Wisconsin; instead, the capital gain amount included in AGI is taxed at the individual’s applicable Wisconsin income tax rate.

Wisconsin Capital Gains Exclusions and Modifications

While Wisconsin generally taxes capital gains as ordinary income, specific state provisions can modify the amount subject to state tax. Wisconsin law allows a 30% deduction for net long-term capital gains from assets held for more than one year. This means that only 70% of such gains are included in Wisconsin taxable income.

A 60% deduction applies to long-term capital gains from farm assets. This means only 40% of qualifying farm asset gains are subject to Wisconsin income tax. Furthermore, recent legislative changes for sales occurring on or after January 1, 2024, expanded the capital gains exclusion for farm assets sold to eligible family members, including ownership interests in farm partnerships or limited liability companies with 15 or fewer natural person partners.

Wisconsin also offers exclusions for long-term capital gains from investments in “qualified Wisconsin businesses.” If an investment in such a business is held for at least five uninterrupted years and other conditions are met, the gain may be excluded from Wisconsin taxable income. Additionally, taxpayers may defer long-term capital gains if the entire gain is reinvested into a qualified Wisconsin business within 180 days of the sale. When a capital loss occurs, Wisconsin allows up to $3,000 ($1,500 for married filing separately) of the excess loss to be deducted against other income if losses exceed gains, with unused losses carried forward.

Estimating Your Wisconsin Capital Gains Tax

Estimating Wisconsin capital gains tax involves a few steps that build upon your federal tax calculations. Begin with the total capital gain amount that is included in your federal Adjusted Gross Income. Next, apply any Wisconsin-specific exclusions or modifications that may reduce your taxable gain. For instance, if you have a long-term capital gain on an asset held for more than one year, you can deduct 30% of that gain for Wisconsin tax purposes.

After accounting for these state-specific adjustments, the resulting Wisconsin taxable capital gain amount is added to your other Wisconsin taxable income. This combined income is then subjected to the applicable Wisconsin income tax rates. For example, if your adjusted capital gain pushes your income into a higher bracket, that portion of your gain will be taxed at the higher marginal rate. It is advisable to consult a tax professional for precise calculations, as your actual tax liability depends on your total income, deductions, and credits.