Wisconsin is known as the badger state. With many attractions, it has seen an influx of residents.
In this article, we will take a look at the Wisconsin estate tax, inheritance tax, and gift tax. If you live in the state or considering moving to the state, understanding the overall tax picture will be very important for you.
Table of contents
Wisconsin estate tax
I am happy to report that Wisconsin has no estate tax. This is not really that unusual. While the federal government has an estate tax, only 12 states assess an estate tax to their residents.
Federal estate tax exemption
The estate tax is assessed against the entire value of assets that a person owns when they pass away. It is often called the death tax.
The tax is calculated by looking at the gross estate. This considers all assets including retirement funds, real estate, stocks and mutual funds, and other assets like cars and boats.
However, you are allowed to deduct from the estate any liabilities including mortgages and credit card debts and also any administrative or funeral costs. Once these are all deducted from the gross assets, you will derive the net estate.
If the net a state is less than the federal exemption amount, then no estate tax is assessed and no estate tax return is required.
Even though your estate may be small as of today, you may find that it will grow well beyond the estate tax exemption amount in the future. This means that everyone who at least has $1 million estate currently should consider some form of estate planning.
Gift tax and inheritance tax
Wisconsin also does not have any gift tax or inheritance tax. In fact, only seven states have an inheritance tax.
But if a Wisconsin resident receives an inheritance from someone who passed away in another state, they could find that they are subject to inheritance tax in that other state. This often does not sound fair, but states are getting more and more aggressive at assessing inheritance tax.
How to Avoid the Wisconsin Estate Tax
Because Wisconsin does not impose an estate tax, you are in good shape. However, the federal estate tax is not going away anytime soon. There are many techniques that can be implemented to reduce any tax liability. Make sure to consider the following strategies:
- Charitable Remainder Trusts
- Special Valuations for Farms and Businesses
- Irrevocable Life Insurance Trust
- Qualified Personal Residence Trusts
- Intentionally Defective Grantor Trust
- Charitable Gift Annuity
- Qualified Terminable Interest Property
- Grantor Retained Unitrusts
- Grantor Retained Annuity Trusts
- Dynasty Trusts
- Grantor Retained Income Trusts
- Direct Medical Payments and Direct Tuition Payments
- Gifts Below Annual Exemption
Wisconsin tax structure
Wisconsin is a moderately tax friendly state. The property tax rates are among some of the highest in the country at around 2%.
Wisconsin also has a sales tax between 5% to 6%, and counties can leverage an additional 1% to 2% on top of that. Income tax rates average from 4% to 8%. This is consistent with national averages.