You’re sitting at a kitchen table in Appleton or maybe a coffee shop in Madison, looking over some old paperwork. Someone close to you has passed away, or perhaps you're just trying to be responsible and plan ahead. The question hits you: does Wisconsin have an inheritance tax?
The short answer? No. Wisconsin does not have an inheritance tax.
Honestly, that’s a huge relief for most people. But before you close this tab and go grab a Spotted Cow, there’s a bit of "fine print" you need to know. Taxes are never quite as simple as a "yes" or "no," especially when the federal government gets involved. While the Badger State won't come knocking for a piece of your inheritance, there are other ways the taxman might show up at the door.
The Death of the Wisconsin Death Tax
Wisconsin actually used to have a pretty robust inheritance tax. It was a whole thing for decades. However, the state started phasing it out back in the late 80s. By January 1, 1992, the inheritance tax was officially dead and buried.
Then there was the state "estate tax." This was slightly different—a tax on the right to transfer property rather than a tax on the person receiving it. Wisconsin kept that around for a while as a "pick-up tax" that was linked to federal credits. But even that disappeared for anyone dying after December 31, 2007.
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So, if you are a resident of Wisconsin today, you don't owe the state a dime just for inheriting money, a house, or your grandpa’s vintage tractor collection.
Wait, What About the Federal Government?
This is where things get interesting. Even though Wisconsin is chill about your inheritance, Uncle Sam might not be. We have to talk about the Federal Estate Tax.
In 2025, the federal exemption was already massive—nearly $14 million. But then 2026 arrived with a bit of a plot twist. Thanks to the One Big Beautiful Bill Act (OBBBA) signed into law in July 2025, the federal estate and gift tax exemption jumped to **$15 million per person**.
If you’re married, you can double that. Basically, a couple can pass down $30 million without paying a single cent in federal estate taxes.
- Tax Rate: If you do happen to be lucky enough to exceed that $15 million mark, the tax rate is a whopping 40%.
- Portability: If one spouse dies and doesn't use their full $15 million exemption, the survivor can "ride-along" and use the leftover amount.
- Inflation: Starting in 2027, this $15 million number is actually scheduled to go up even more based on inflation.
Most of us aren't exactly sitting on $15 million. For the 99% of people living in Wisconsin, federal estate taxes are a non-issue. But it's good to know the ceiling is that high.
The Sneaky Taxes That Still Apply
Just because there isn't a "Wisconsin inheritance tax" doesn't mean the inheritance is totally tax-free. You’ve gotta watch out for the side-door taxes.
1. Capital Gains and the "Stepped-Up Basis"
This is actually a win for you. Let’s say your aunt bought a house in Waukesha for $50,000 back in 1970. Today, it’s worth $450,000. If she sold it the day before she died, she’d owe taxes on that $400,000 gain.
But when you inherit it, the "basis" resets. The IRS looks at the value on the day she died—$450,000—and makes that your starting point. If you sell it a month later for $455,000, you only pay taxes on the $5,000 profit. It’s one of the few genuinely kind rules in the tax code.
2. Income Tax on Retirement Accounts
If you inherit a traditional IRA or a 401(k), the money inside has never been taxed. When you start taking withdrawals, the state of Wisconsin and the IRS will treat that money as regular income.
You'll pay your normal income tax rate on those distributions. If you inherit a Roth IRA, though, you’re usually in the clear—those are typically tax-free because the taxes were paid upfront.
3. Out-of-State Property
Here is a weird one. If you live in Green Bay but inherit a house in Pennsylvania or Kentucky, you might actually owe inheritance tax to that state. A handful of states—like Nebraska, Iowa, and Maryland—still have their own inheritance taxes. They don't care where you live; they only care that the property is within their borders.
Giving It Away While You're Alive
A lot of people ask if they should just give their money away now to avoid future headaches. In Wisconsin, there is no state gift tax. You can give your kids $1 million tomorrow and the state won't charge you for it.
On the federal side, there is an "annual exclusion." For 2026, you can give $19,000 to as many people as you want without even telling the IRS. If you go over that, it just eats into your $15 million lifetime limit. It doesn't mean you pay tax immediately; it just means you have to file a Form 709 to track it.
Practical Next Steps for Wisconsinites
If you are managing an estate or planning your own, don't let the lack of an inheritance tax make you lazy. There's still work to do.
- Check Your Beneficiaries: Make sure your life insurance and retirement accounts have the right names on them. These "transfer on death" (TOD) or "payable on death" (POD) designations bypass probate entirely, which saves time and legal fees.
- Handle the Final Income Tax: Someone still has to file the final Wisconsin Form 1 for the person who passed away. If the estate earns more than $600 in income (like interest or rent) while it's being settled, you'll also need to file a Wisconsin Fiduciary Income Tax Return (Form 2).
- The $50,000 Rule: If the total value of the assets is $50,000 or less, you can often avoid a long court process by using a "Transfer by Affidavit." It’s a simple paper you sign that lets you collect the assets without a lawyer-led circus.
- Consult a Pro: If you’re dealing with more than $15 million, or if there is a messy family business involved, talk to an estate attorney in your county. Laws change—and as we saw with the OBBBA in 2025, they can change fast.
Wisconsin is a very "heir-friendly" state. You get to keep what was left to you without a specific state-level penalty. Just keep an eye on those IRA withdrawals and the federal limits, and you'll be just fine.
Actionable Insight: If you're inheriting a retirement account, don't rush to cash it out in one lump sum. Doing so could push you into a much higher tax bracket for the year. Instead, look into the "10-year rule" for inherited IRAs, which often allows you to spread those withdrawals out and minimize the tax hit.