Basics of the Wisconsin Income Tax

• The state of Wisconsin has levied a tax on the income of its residents since 1911. In 2008, income taxes accounted for 31 percent of the state's total revenue, according to the Wisconsin Legislative Council. This makes the state's income tax Wisconsin's second largest source of revenue, after property tax. Income tax in Wisconsin only applies to individuals who make more than $10,000 per year as full-time Wisconsin residents, or married couples making more than $18,150.
  
  

Basics of Deductions

• For state and federal income tax purposes, deductions are expenses that a taxpayer is allowed to subtract from her gross income for the purpose of figuring her total tax liability. Deductions usually are allowed for expenses related to earning income, called business expenses. They also include personal spending related to activities the government tries to encourage, such as homeownership, donations to charity or college education. Outside of fulfilling legal requirements, the primary reason a taxpayer files a tax return is to claim deductions.
  
  

Standard Vs. Itemized Deductions

• The Wisconsin individual income tax return, Form 1, is the document used to figure deductions. Deductions include costs like medical expenses and interest, usually as they relate to business. In most cases, individual taxpayers will claim the Wisconsin standard deduction to cover these kinds of expenses. This is because the expenses they would claim if they itemized their deductions (as they may have done on the federal tax return) are unlikely to exceed the standard deduction amount. Those with a considerable number of deductions or very expensive deductions are more likely to benefit from itemizing.
  
  

Special Deductions and Credits

• The state allows individual taxpayers to claim deductions and credits on their tax returns for a large number of activities. For example, Wisconsin allows individuals to deduct the total property tax they paid for schools during the tax year. The state income tax also allows a credit for armed service members who are stationed overseas, taxpayers who own and preserve farmland and those who pay for historic rehabilitation projects. Some credits are based on income. For example, the homestead credit is available to households making less than $24,680, who own or rent a home on at least one acre of farmland. Those credits not itemized on the Form 1 can be figured using Schedule CR to the income tax return.