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Tax Year 2026Updated July 13, 2026

Does Wisconsin Tax Tips in 2026?

Yes - Wisconsin taxes tip income in 2026. Wisconsin's IRC conformity date (December 31, 2022) predates the OBBBA, so the federal tips deduction (IRC §224) does not apply for Wisconsin state purposes. SB 859 explicitly excludes OBBBA individual deductions. Governor Evers vetoed SB 36 (the standalone tips tax bill) on April 4, 2026. Tip income remains fully subject to Wisconsin's graduated income tax rates of 3.5%, 4.4%, 5.3%, and 7.65%. Wisconsin's non-conformity on tips is definitive.

How Wisconsin's Tips Tax Treatment Works

Wisconsin uses a "fixed-date" approach to IRC conformity: the state's tax code references the Internal Revenue Code as it existed on December 31, 2022. Any federal tax law changes enacted after that date do not automatically apply to Wisconsin state income tax. The OBBBA - including the tips deduction under IRC §224 - was enacted in 2025, well after Wisconsin's conformity cutoff.

This means that while Wisconsin starts its income tax calculation from federal adjusted gross income (AGI), it requires taxpayers to add back any deductions that are not recognized under the 2022 version of the IRC. Workers who claim the federal tips deduction on their IRS return must add that amount back on their Wisconsin return, effectively making their tip income fully taxable at Wisconsin rates.

Two legislative avenues have now been definitively closed. SB 859, which updated Wisconsin's IRC conformity date, explicitly excludes OBBBA individual deductions - so the conformity date update does not help tipped workers. SB 36, a standalone bill that would have created a Wisconsin state-level tips deduction, was vetoed by Governor Evers on April 4, 2026. Wisconsin's non-conformity on tips is now settled law for 2026.

Federal Tips Deduction Quick Reference

DetailValue
IRC Section§224 (OBBBA)
Maximum deduction$25,000 tips
Deduction typeAbove-the-line (Schedule 1-A)
FICA still applies?Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?No (MFJ or Single/HoH only)
Effective datesJan 1, 2025 – Dec 31, 2028
Wisconsin treatmentDoes not conform

Worked Examples Comparing Federal and Wisconsin Treatment

Example 1: Restaurant server (single filer, $40,000 income, $15,000 in tips)

Federal return:
Qualified tip income: $15,000
Tips deduction claimed: $15,000 (capped at $25,000)
Estimated federal tax savings: $1,800.00

Wisconsin return:
Wisconsin does not recognize the federal tips deduction. The full $15,000 in tip income remains subject to Wisconsin income tax. At this income level, most tip income falls in Wisconsin's 4.4% bracket ($14,680–$50,480). Estimated WI tax on tip income: approximately $660.

Example 2: Bartender (single filer, $70,000 income, $25,000 in tips - federal cap reached)

Federal return:
Qualified tip income: $25,000
Tips deduction claimed: $25,000 (capped at $25,000)
Estimated federal tax savings: $5,500.00

Wisconsin return:
Wisconsin does not recognize the federal tips deduction. The full $25,000 in tip income remains subject to Wisconsin income tax. At this income level, tip income falls in Wisconsin's 5.3% bracket ($50,480–$315,310). Estimated WI tax on tip income: approximately $1,325.

Wisconsin Non-Conformity Is Now Definitive

Two potential legislative paths to Wisconsin tips tax relief have been closed:

Workers should plan on tip income being fully taxable in Wisconsin for tax year 2026. There is no pending legislation that could change this outcome.

Wisconsin's Graduated Brackets and Tips

Wisconsin's four-bracket system means the state tax impact of tip income depends on total income. For a server earning $40,000, most tip income falls in the 4.4% bracket ($14,680–$50,480 for single filers). For a higher-earning tipped worker at $70,000, tip income pushes into the 5.3% bracket ($50,480–$315,310). Wisconsin's maximum standard deduction of $12,760 (single) phases out at higher incomes, further increasing the effective tax burden on tip income for higher earners.

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Frequently Asked Questions

Does Wisconsin conform to the federal tips deduction under the OBBBA?
No. Wisconsin's IRC conformity date is fixed at December 31, 2022, which predates the OBBBA (enacted 2025). The federal tips deduction (IRC §224) does not apply for Wisconsin state purposes. SB 859 explicitly excludes OBBBA individual deductions, and Governor Evers vetoed SB 36 (the standalone tips bill) on April 4, 2026. No path to conformity is currently available.
What is SB 859 and does it help Wisconsin tipped workers?
SB 859 updated Wisconsin's IRC conformity date but explicitly excludes OBBBA individual deductions - including the tips deduction under IRC §224. It does not provide state-level relief for tipped workers. Governor Evers also vetoed SB 36, the standalone tips tax bill, on April 4, 2026. Wisconsin's non-conformity on tips is now definitive.
What Wisconsin income tax rates apply to tip income?
Wisconsin uses four graduated brackets: 3.5% on the first $14,680, 4.4% on $14,680–$50,480, 5.3% on $50,480–$315,310, and 7.65% above $315,310 (single filers, TY2026). Most tipped workers' tip income falls in the 4.4% or 5.3% brackets.
Do I need to add back the federal tips deduction on my Wisconsin return?
Yes. If you claim the federal tips deduction on your federal return and it reduces your federal AGI, you will need to add that amount back when computing Wisconsin taxable income. Wisconsin starts from federal AGI but applies its own modifications - including adding back deductions not recognized under the December 31, 2022 conformity date. This requirement is unaffected by SB 859 (which excludes OBBBA deductions) or the veto of SB 36.
Does Wisconsin's standard deduction help offset the tip income tax?
Wisconsin provides a maximum standard deduction of $12,760 for single filers (TY2026), but it uses an income-based formula that phases out at higher incomes. This deduction applies to all income, not specifically to tip income. Most tipped workers will have already used their standard deduction against regular wages.
What is Wisconsin's IRC conformity date and why does it matter?
Wisconsin conforms to the Internal Revenue Code as of December 31, 2022. This means Wisconsin recognizes federal tax law changes enacted through that date but does not automatically adopt later changes. The OBBBA, enacted in 2025, falls outside this window. Wisconsin must pass new legislation (like SB 859) to adopt OBBBA provisions.