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Are Veteran Benefits Taxable in Wisconsin? A Complete Guide

John Reuter

Text with the wording, Are Your Veteran Benefits Taxable in Wisconsin.  With a house and American Flag in the background.

As a veteran in Wisconsin, you’ve served your country with honor, and now it’s time to make sure you’re maximizing your benefits. One of the most common financial questions veterans ask is, “Are veteran benefits taxable in Wisconsin?” This guide breaks down how different veteran benefits are taxed at the federal and state level, helping you navigate your finances and keep more of what you’ve earned.


Are VA Benefits Taxable?

The good news is that most Veterans Affairs (VA) benefits are not taxable at either the federal or Wisconsin state level. This means you can receive these benefits without worrying about additional tax liability.


Here’s a breakdown of some key VA benefits and their tax treatment:


1. VA Disability Compensation

  • Tax Status: Not taxable at both federal and state levels.

  • Description: This benefit is paid to veterans with service-connected disabilities. It is completely tax-free, meaning it does not need to be reported as income on your tax return.

2. VA Pension

  • Tax Status: Not taxable at both federal and state levels.

  • Description: The VA pension is a needs-based benefit for wartime veterans who meet financial and disability criteria. This income is also tax-exempt.

3. VA Education Benefits (GI Bill & Vocational Rehabilitation and Employment - VR&E)

  • Tax Status: Not taxable at both federal and state levels.

  • Description: The Post-9/11 GI Bill, Montgomery GI Bill, and Vocational Rehabilitation benefits help cover education and training costs and are not considered taxable income.

4. VA Housing Assistance (VA Home Loans & Grants)

  • Tax Status: Not taxable

  • Description: VA home loan benefits and grants for disabled veterans to modify their homes (such as the Specially Adapted Housing Grant) are tax-free.

5. VA Health Care Benefits

  • Tax Status: Not taxable

  • Description: Health care and medical treatment through the VA system, including prescriptions and mental health services, are not taxable.

Wisconsin State Tax Exemptions for Veterans

Wisconsin provides additional tax benefits for veterans that can help reduce your overall tax burden.


Here are some key state-level exemptions:


1. Wisconsin Homestead Credit

  • Qualifying veterans may be eligible for property tax relief through the Wisconsin Homestead Credit.

  • This is particularly beneficial for low-income veterans and those with disabilities.

2. Wisconsin Disabled Veteran & Surviving Spouse Property Tax Credit

  • 100% property tax exemption for disabled veterans with a 70% or greater service-connected disability.

  • Eligibility: Veterans must have a service-connected disability rating from the VA.

  • This credit is also available for unremarried surviving spouses.

3. Military Retirement Pay

  • Tax Status in Wisconsin: Fully exempt from state income tax.

  • Who qualifies? Retired military personnel who receive a pension from the Armed Forces, Reserves, or National Guard.

  • This exemption makes Wisconsin a great place for military retirees.

4. Wisconsin Sales Tax Exemptions for Veterans

  • Some veterans, especially those with a disability, may qualify for sales tax exemptions on adaptive equipment for vehicles, medical devices, and other necessary goods.


What Veteran Benefits Are Taxable?


Although most veteran benefits are tax-exempt, there are a few that may be subject to taxation:

  • Military Retirement Pay (Federal Taxable, but State-Exempt in Wisconsin): While the federal government taxes military retirement pay, Wisconsin does not tax it.

  • Veterans Working a Civilian Job: If you’re working a civilian job in addition to receiving VA benefits, your wages and salaries are subject to normal income taxes.

  • VA Life Insurance Dividends & Interest: While life insurance proceeds are not taxed, if you earn interest on those dividends, that interest is taxable.

How to Claim Veteran Tax Benefits in Wisconsin

  1. File Your Wisconsin State Tax Return Correctly: When filing your Wisconsin state taxes, make sure to indicate military retirement pay and other exempt benefits to take advantage of the state’s veteran-friendly tax laws.

  2. Apply for Property Tax Credits: If you qualify for the Disabled Veteran Property Tax Credit, apply with your local tax assessor’s office.

  3. Consult with a Tax Professional: If you’re unsure whether your benefits are taxable or if you qualify for state exemptions, consulting with a tax professional or a Veterans Service Officer (VSO) can help you get the most out of your benefits.


Final Thoughts: Keep More of Your Benefits in Wisconsin


Wisconsin is one of the most veteran-friendly states when it comes to taxes. With no tax on VA benefits, tax-free military retirement pay, and valuable property tax exemptions, veterans in Madison, Sun Prairie, and across Dane County can maximize their benefits and financial well-being.

If you’re a veteran considering buying or selling a home in Wisconsin, I’d love to help. As a fellow veteran and experienced real estate agent, I understand the unique needs of those who have served. Let’s work together to find the perfect home or investment for your future!


📞 John Reuter

The Veteran Realtor

608.669.4226

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