How Wisconsin Taxes SSDI Payments

Wisconsin does not tax Social Security Disability Insurance (SSDI) payments as state income. This means if SSDI is your only income source, you owe no Wisconsin state income tax on those benefits, even if you file a federal return.

However, the federal government may tax your SSDI depending on your total income — and that federal tax obligation exists regardless of where you live. Wisconsin's exemption applies only to state tax. If you receive other income alongside SSDI (wages, pensions, interest, rental income), you will owe Wisconsin state tax on that other income, but not on the SSDI portion itself.

The key distinction: Wisconsin treats SSDI the same way it treats federal Social Security retirement benefits — both are exempt from state taxation. This exemption is written into Wisconsin Statute § 71.05(6)(a), which lists income sources that are not subject to Wisconsin income tax.

Key Takeaways

  • Wisconsin does not tax SSDI payments as state income, so SSDI alone does not trigger a Wisconsin state tax filing requirement.
  • If you have other income (wages, self-employment, pensions, interest), you owe Wisconsin tax on that income but not on your SSDI.
  • Federal taxation of SSDI is separate from Wisconsin state tax and depends on your combined income from all sources.
  • You may still need to file a Wisconsin return if your non-SSDI income exceeds the state filing threshold, even though SSDI itself is tax-free in Wisconsin.

When You Have SSDI Plus Other Income

If you receive SSDI and also earn wages, have self-employment income, or receive a pension, you must separate the two for Wisconsin tax purposes. Only the non-SSDI income counts toward your Wisconsin tax obligation.

For example: if you receive $1,200 per month in SSDI and earn $800 per month from part-time work, Wisconsin taxes only the $800. The $1,200 SSDI is not counted. You would file a Wisconsin return if your earned income and other non-SSDI sources exceed Wisconsin's filing threshold for your filing status.

Wisconsin's filing threshold varies by age and filing status. For the 2024 tax year, a single person under 65 must file if their gross income (excluding SSDI) is $13,200 or more. If you are 65 or older, the threshold is higher. Check the Wisconsin Department of Revenue website or your tax forms each year, as thresholds change annually.

Federal Tax on SSDI in Wisconsin

While Wisconsin exempts SSDI from state tax, the federal government may tax your SSDI benefits if your combined income is high enough. This federal tax rule applies to you whether you live in Wisconsin or any other state.

The federal threshold depends on your "combined income," which is calculated as your adjusted gross income plus nontaxable interest plus half of your SSDI benefits. If your combined income exceeds $25,000 (single) or $32,000 (married filing jointly), up to 50% or 85% of your SSDI may be subject to federal income tax.

Because Wisconsin does not tax SSDI, you could owe federal tax on your SSDI while owing zero Wisconsin state tax. This is not a Wisconsin rule — it is a federal rule that affects residents of every state. If you expect federal taxation of your SSDI, you may want to set aside money for your federal return or request that the Social Security Administration withhold federal taxes from your monthly benefit.

Filing a Wisconsin Return When You Receive SSDI

You must file a Wisconsin return if your non-SSDI income exceeds the state filing threshold, even though the SSDI itself is not taxed. Do not assume you can skip filing just because SSDI is exempt.

When you file, report all income on your Wisconsin return — wages, self-employment, pensions, interest, and other sources. Then claim the SSDI exemption by following the instructions on Wisconsin Form 1 (the state income tax return). The form will guide you to exclude SSDI from taxable income.

If you also owe federal tax, you will file both a federal return (Form 1040) and a Wisconsin return (Form 1) in the same tax year. The two returns are separate; exemptions and deductions on one do not automatically explore to the other.

What Documents You Need

Social Security sends you a Form SSA-1099-SM each January if you received SSDI during the previous year. This form shows your total SSDI benefits for the year. Keep this document for your records.

You do not need to attach the SSA-1099-SM to your Wisconsin return, but you should have it available if the Wisconsin Department of Revenue asks questions. You will also need documentation of any other income — W-2 forms from employers, 1099 forms for self-employment or interest, pension statements, and so on.

If you work and earn wages, your employer will send you a W-2. Self-employment income requires you to track your earnings and expenses and report them on Schedule C (federal) and Wisconsin Schedule SE. Keep receipts and records for at least three years.

SSDI and Wisconsin Tax Credits

Even though SSDI itself is not taxed in Wisconsin, you may still be able to claim certain Wisconsin tax credits if you have other income. The most common is the Earned Income Tax Credit (EITC), which is available at both federal and state levels.

Wisconsin's EITC is a refundable credit, meaning you can receive money back even if you owe no tax. To claim it, you must have earned income (wages or self-employment) and meet income limits. SSDI does not count as earned income for EITC purposes, but if you work part-time or have self-employment income, you may be able to claim the credit based on that earned income.

Other credits may explore depending on your situation — for example, the Homestead Property Tax Credit if you own your home, or the Child and Dependent Care Credit if you pay for childcare. Check the Wisconsin Department of Revenue website or speak with a tax preparer to see which credits you may claim.

Frequently Asked Questions

Do I have to file a Wisconsin tax return if SSDI is my only income?

No. If SSDI is your only income source, you have no Wisconsin state tax filing requirement because Wisconsin does not tax SSDI. However, you may still want to file a federal return if you owe federal tax on your SSDI or if you are owed a federal refund.

Will I owe Wisconsin tax if I work part-time and receive SSDI?

You will owe Wisconsin tax on your wages, but not on your SSDI. If your wages exceed Wisconsin's filing threshold for your age and status, you must file a Wisconsin return. The SSDI portion is always exempt.

Can I claim the Earned Income Tax Credit in Wisconsin if I receive SSDI?

Yes, if you have earned income (wages or self-employment) that meets the credit's requirements. SSDI itself does not count as earned income, but your wages or self-employment income do. You must meet Wisconsin's income limits to claim the credit.

What if I owe federal tax on my SSDI but no Wisconsin tax?

This is possible and common. Wisconsin exempts SSDI from state tax, but the federal government may tax it if your combined income is high enough. You would file a federal return and owe federal tax, but file a Wisconsin return showing no tax owed (or a refund if you had withholding).

Where do I report the SSDI exemption on my Wisconsin return?

Follow the instructions on Wisconsin Form 1 (the state income tax return). The form will direct you to list SSDI as an exempt income source. You will need your SSA-1099-SM form to show the amount of SSDI you received during the year.