What is the Capital Gains Tax rate in Wisconsin?
In Wisconsin, capital gains are subject to state income tax, but the way they are taxed differs slightly from ordinary income. Currently, 60% of long-term capital gains from the sale of assets such as stocks, bonds, or real estate held for more than one year are exempt from Wisconsin income tax. This means that only 40% of those gains are taxable at the individual’s ordinary state income tax rate, which ranges from 3.5% to 7.65% depending on income bracket, subject to annual adjustment.
For example, if you realize $10,000 in long-term capital gains, only $4,000 would be included in your taxable income for Wisconsin purposes. Short-term capital gains (assets held for one year or less) do not qualify for the exemption and are fully taxable as ordinary income.
It’s also important to note:
- Certain Assets: Gains from the sale of Wisconsin-qualified farm assets and specific small business stock may be eligible for even greater exemptions.
- Federal vs. State: Federal capital gains tax rules still apply separately, and Wisconsin’s exemption only affects the state portion of your tax liability.
- Business Considerations: The owners of corporations and LLCs that are pass-through entities should be careful about the issue of capital gains that will be reflected in the state tax returns of the members.
For entrepreneurs, investors, and expanding businesses, understanding the correct treatment of capital gains tax is the key to successful tax planning and long-term strategy. For tailored guidance on structuring investments and managing state-level tax obligations, professional advisors or service providers such as OneIBC USA can help coordinate with your tax professional.
