Updated October 5, 2026. Quick answer: Yes. Wisconsin taxes trust income, and the statute applies to estates and trusts the same rates that apply to individuals; the tax is imposed on “the Wisconsin taxable income of estates or trusts” and is paid by the fiduciary.
How Wisconsin treats trust income
| Item | What the documents say |
|---|---|
| Treatment | Wisconsin taxes the Wisconsin taxable income of estates and trusts under section 71.125, with the fiduciary paying the tax. The source says: “shall apply to the Wisconsin taxable income of estates or trusts” except nuclear decommissioning trust or reserve funds. |
| Who counts as a resident trust | A testamentary trust follows the decedent’s domicile, and a trust that became irrevocable on or after October 29, 1999 (or became irrevocable earlier and was first administered in Wisconsin on or after that date) is resident by the Wisconsin residence of the person who placed the property in it. The source says: “is resident of Wisconsin if the decedent was domiciled in Wisconsin” at the time of death, unless transferred by a court having jurisdiction to another court’s jurisdiction. |
| Rate on trust income | For taxable years beginning after 2024 the statute applies graduated rates to fiduciaries, from 3.50 percent on the first $14,680 of taxable income to 7.65 percent above $323,290. The source says: “On all taxable income exceeding $323,290, 7.65 percent.” The 2025 instructions print the same $323,290 breakpoint and 7.65% rate in their worksheet. |
| Distribution deduction | The instructions split items into distributable and nondistributable income, and the fiduciary return reports only the nondistributable additions and subtractions on its income lines. The source says: “Enter in column 2, Nondistributable Income”. The documents read do not use the phrase distribution deduction. |
| Nonresident trusts | A nonresident trust is taxed on Wisconsin source income, and it files if it has any Wisconsin taxable income or $600 or more of Wisconsin source gross income. The source says: “A nonresident or part-year resident trust must file a Wisconsin fiduciary” income tax return if it has any Wisconsin taxable income or gross income from Wisconsin sources of $600 or more. |
| Return to file | Resident trusts, and nonresident and part-year resident trusts, file Wisconsin Form 2, with Schedule NR completed by the nonresident and part-year ones. The source says: “Every trustee of a Wisconsin trust must file a Wisconsin fiduciary” income tax return if the trust has any taxable income or gross income of $600 or more. |
| Electing small business trusts | An electing small business trust is taxed at the highest rate under the statute, which for taxable years after 2024 is 7.65 percent. The source says: “is subject to tax at the highest rate under s. 71.06” on its income as computed under section 641 of the Internal Revenue Code. |
| Withholding for nonresident beneficiaries | A trust with nonresident beneficiaries must withhold on the income allocable to them, at 7.65% when the beneficiary is an individual, estate or trust. The source says: “the withholding rate is 7.65%”. The rate is 7.9% for a partnership, limited liability company or corporation. |
A $10,000 example
The tax on $10,000 of taxable income a trust keeps depends on the bracket it lands in. Taxed wholly at the lowest printed rate, 3.50%, the tax is computed as $10,000 x 3.50% = $350; taxed wholly at the highest, 7.65%, it is computed as $10,000 x 7.65% = $765. The state’s own schedule decides which applies. Federal tax on the trust’s income still applies.
Income the trust passes out to a beneficiary is handled as the distribution deduction row above describes.
What changes in 2026
The latest documents read print no 2026 change to how trust income is taxed.
Federal rules
The state’s treatment sits on top of the federal one. The federal brackets a trust faces are laid out in trust tax brackets versus individual brackets, and capital gains that a trust keeps are covered in capital gains stay in the trust. The IRS explains the federal return in the About Form 1041 page.
Related: how Wisconsin taxes retirement income, whether Wisconsin taxes pensions, what a living trust costs in Wisconsin, and federal trust tax brackets.
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Answer againSources
- 2025 Instructions for Wisconsin Fiduciary Return Form 2 and Schedule 2K-1 (Wisconsin Department of Revenue): https://www.revenue.wi.gov/TaxForms2025/2025-Form2-Inst.pdf
- Wisconsin Statutes, subchapter II of chapter 71, sections 71.12 to 71.17 (Wisconsin Legislature): https://docs.legis.wisconsin.gov/statutes/statutes/71/ii/14
- Wisconsin Statutes, section 71.06 Rates of taxation (Wisconsin Legislature): https://docs.legis.wisconsin.gov/statutes/statutes/71/i/06
Sources: the primary documents linked above, read on October 5, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.