Try a calculator
Tax Year 2026Updated July 13, 2026

Does Wisconsin Tax Tips in 2026?

Yes - Wisconsin currently 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. Tip income remains fully subject to Wisconsin's graduated income tax rates of 3.5%, 4.4%, 5.3%, and 7.65%. Pending legislation (SB 859) would update the conformity date, but it has not been enacted as of August 2026.

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.

The Wisconsin Legislature has introduced SB 859, which would update the state's IRC conformity date to encompass OBBBA provisions. If enacted, the tips deduction would flow through to Wisconsin returns. However, as of August 2026, SB 859 has not passed. Workers should plan on tips being fully taxable in Wisconsin for tax year 2026, while monitoring the bill's progress.

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.

Pending Legislation SB 859

SB 859 is pending legislation in the Wisconsin Legislature that would update Wisconsin's IRC conformity date to include the OBBBA provisions. If enacted, the federal tips deduction (up to $25,000) would automatically apply for Wisconsin state purposes, reducing Wisconsin taxable income for qualifying tipped workers.

Current status: As of August 2026, SB 859 has not been enacted. Its passage is not guaranteed and workers should not rely on it for 2026 tax planning. If SB 859 passes mid-year, it may apply retroactively to January 1, 2026 (common for conformity updates), but this would depend on the bill's specific language.

This page will be updated if SB 859 is enacted or fails definitively.

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.

Related Tools

Frequently Asked Questions

Does Wisconsin conform to the federal tips deduction under the OBBBA?
No - not currently. 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 unless the legislature updates the conformity date. SB 859, which would update conformity, is currently pending.
What is SB 859 and could it change Wisconsin's position?
SB 859 is pending legislation in the Wisconsin Legislature that would update Wisconsin's IRC conformity date to include the OBBBA provisions. If enacted, it could make the federal tips deduction applicable to Wisconsin state income tax. As of August 2026, SB 859 has not been enacted. Workers should monitor the bill's status but plan on tips being fully taxable in Wisconsin for 2026.
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 Wisconsin's conformity date.
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.