According to Wisconsin Tax Information for Military Personnel and Veterans, all of the income earned while a military serviceperson is taxable on the resident return regardless of source or where it was earned.
Wisconsin Residents with Military Income
You will need to file a resident return and report all of your income. If your military income is excluded from federal income, it is also excluded from your state return.
Wisconsin Exclusion for Residents Reserve or National Guard Pay: You may be able to exclude your military income if you were a member of the National Guard or Reserves and the military pay was due to being called into active federal service under special state service authorized by the Dept. of Defense (32USC502(f), 10USC12302(a) or 10USC12304). Do not include weekend or training pay.
To claim this subtraction in the account, follow these steps in the program:
- State Section
- Resident Wisconsin Return
- Subtractions from Income
- Other Subtractions
- Add Subtraction
- Enter Other Subtraction Amount
- Enter Reserve or National Guard members under description of other subtraction
- Continue
Nonresident of Wisconsin stationed in Wisconsin
Your active duty pay is not taxable to Wisconsin. Any other income earned while living in Wisconsin is considered Wisconsin source income and is taxable to the state. You may need to select a code from the Special Conditions listed in the Basic Information section of the nonresident return to deduct any military pay from the return.
To enter the subtraction from income for the nonresident active duty military pay, follow these steps in the program:
- State Section
- Nonresident Wisconsin Return
- Income Subject to Tax Additions to and Subtractions from Income- Schedule M Do you need to make Adjustments to the WI other income amount? Change to Yes Subtractions From Income Amounts not taxable by Wisconsin (only if included in column B of Form 1NPR or line 1 or 31 of this schedule).
Enter this only if the W-2 has Wisconsin listed on it for the state. You also need to complete the Basic Information and Legal Residence sections of the nonresident return.
If one spouse is a resident and the other is not, you can file:
- Married Filing Joint on a nonresident return
- Married Filing Separate returns (each spouse files using the correct residency for their home state of record).
Deductions & Credits
Armed Forces Members Credit:
The Armed Forces Members Credit can be claimed by residents of Wisconsin only. Nonresidents or part year residents do not qualify for the credit. The credit is equal to the amount of military pay received for services performed outside of the US, not more than $300 per active duty servicemember.
To enter this subtraction into the account, Follow these steps in the program:
- State Section
- Wisconsin Resident Return
- Credits
- Armed Forces Member Credit
- Enter $300 for one taxpayer and $600 if filing a joint return and both taxpayers qualify
- Continue
Please be advised that the last year that this credit was available is 2020.
Military Retirement:
Retirement income from Defense Finance and Accounting Service or payments related to the Coast Guard, NOAA or commissioned corps of the Public Health Service are not taxable on your Wisconsin return.
To enter this subtraction into the account, follow these steps in the program:
- State Section
- Wisconsin Resident Return
- Subtractions from Income
- Enter amount of subtraction under Military & Uniformed Services Retirement Benefits
- Continue