Wisconsin Schedule 1: Adjustments to Your Income

State tax laws are not always identical to federal laws, creating differences in what is considered taxable income or a deductible expense. For Wisconsin taxpayers, these differences are reconciled on Schedule I, Adjustments to Federal Income. This form is a required attachment to the main Wisconsin tax return, Form 1, for anyone whose income or deductions vary between federal and state rules. Filing Schedule I is required if you have specific types of income, such as interest from another state’s municipal bonds, or if you qualify for certain subtractions unique to Wisconsin.

Additions to Federal Income

Part I of Wisconsin’s Schedule I details the specific items that must be added back to your federal adjusted gross income (AGI). A primary example is interest from state and municipal bonds issued by states other than Wisconsin. While this interest is tax-free at the federal level, Wisconsin requires you to add it to your income, making it subject to state tax. This ensures that only bonds issued by Wisconsin and its municipalities receive preferential tax treatment within the state.

Another addition relates to business depreciation. Federal tax law, particularly Section 179 and bonus depreciation rules, allows businesses to take a large, immediate deduction for the cost of new assets. Wisconsin’s tax code does not fully conform to these accelerated depreciation methods. The difference between the larger federal depreciation deduction and the smaller amount allowed by Wisconsin must be calculated and added back to your federal AGI.

Taxpayers may also need to report additions related to certain savings accounts. If you previously claimed a Wisconsin deduction for contributions to a college or technical college savings account (like an Edvest or Tomorrow’s Scholar account), and then withdrew funds for non-qualified expenses, those funds must be added back to your income. This recaptures the prior tax benefit. Similarly, federal net operating loss (NOL) carryovers deducted on your federal return must be added back; Wisconsin has its own separate calculation and limitations for NOLs.

Subtractions from Federal Income

Some items can be subtracted, reducing the amount of income subject to Wisconsin tax. A common subtraction is for interest received from U.S. government obligations. Income from Treasury bonds, notes, and bills is taxable at the federal level but is exempt from state income tax. Taxpayers must list this interest on Schedule I to remove it from their Wisconsin taxable income.

State income tax refunds can also be a subtraction. If you itemized deductions on your federal return in a prior year and deducted state income taxes, any refund you received is considered taxable income by the IRS. However, since Wisconsin does not allow a deduction for state income taxes paid, it also does not tax the refund. You can subtract the amount of the state tax refund that was included in your federal AGI.

Wisconsin offers several unique subtractions. For individuals age 65 or older, a subtraction of up to $5,000 of certain retirement income may be allowed, though this is only available to taxpayers with a federal adjusted gross income of less than $15,000 for single filers or less than $30,000 for married joint filers. For the 2024 tax year, contributions to a Wisconsin-sponsored college savings account can be subtracted, up to a maximum of $5,000 per beneficiary. Wisconsin also provides a subtraction for tuition and fees paid for higher education, which for 2024 is worth up to $7,333 per student, although this benefit is reduced for higher-income taxpayers.

Adjustments to Itemized Deductions

Part II of Schedule I is dedicated to modifying the itemized deductions you claimed on your federal Schedule A because Wisconsin’s rules differ from federal regulations. The most significant adjustment for nearly all taxpayers who itemize is the add-back of state and local income taxes. On a federal return, you can deduct state and local taxes paid, up to a limit of $10,000 per household. Wisconsin law, however, does not permit a deduction for income taxes paid to any state, so the amount you deducted on your federal return must be added back.

In contrast to the income tax add-back, Wisconsin allows a subtraction for the cost of medical care insurance. This allows you to deduct the amount you paid for health, dental, and long-term care insurance premiums. This subtraction is not limited by your income level, unlike many federal medical expense deductions, and provides a direct reduction to your Wisconsin income.

Other adjustments to itemized deductions may be necessary depending on your circumstances. For example, the income threshold for deducting medical expenses can differ between federal and state law, potentially requiring an adjustment.