Updated October 16, 2026. Quick answer: Wisconsin taxes 403(b) and 457 distributions, and the retirement-income subtraction of $24,000 at 67 or older applies to a taxable distribution from a qualified retirement plan or IRA; the publication’s list of qualified plans, given in its nonresident section, includes 403(b) and 457 plans.
More state retirement-income schedules, line by line: Wisconsin Schedule SB.
Wisconsin at a glance
| Item | What the documents say |
|---|---|
| How the state treats 403(b) and 457(b) withdrawals | Taxable, unless a retirement subtraction applies |
| Do the state’s documents name these plans? | The documents read name both 403(b) and 457 plans |
| Retirement exclusion or credit | Subtraction of up to $24,000 per person ($48,000 joint) at 67 or older, or up to $5,000 at 65 or older with an income cap |
| Public-employee pension rule | Yes, certain pre-1964 local, state and federal retirement systems are separately exempt |
| Rate in the documents read | Progressive, 3.50% to 7.65% |
| Changed for 2026? | A new retirement income subtraction for those 67 or older starts with tax year 2025 |
What the Wisconsin documents say
Publication 126 says “tax-sheltered annuity benefits received are included in taxable income” and lists “An annuity contract under sec. 403(b), IRC” and 457 deferred compensation plans among qualified plans. It then describes two subtractions, $24,000 per person ($48,000 if both spouses on a joint return qualify) at 67 or older and $5,000 at 65 or older, and says claiming the larger one gives up any Schedule CR credit.
The Department’s rate page says “Wisconsin individual income tax rates vary from 3.50% to 7.65%”.
Withholding and federal tax
Whether a state withholds is a separate rule: see state withholding on retirement withdrawals. Federal rules: 403(b) withdrawal rules and 457(b) withdrawal rules. The IRS says pension and annuity payments from a qualified employer plan have “all or some portion of the amounts you receive may be taxable”.
What the documents do not say
- The publication describes the subtractions for a qualified retirement plan or IRA and lists 403(b) and 457 plans as qualified plans only in its nonresident section, so it does not repeat that list where it describes the subtractions.
- The $5,000 subtraction has a federal adjusted gross income cap stated in the publication.
Common mistakes
- Assuming Wisconsin’s rule for a 401(k) or IRA also covers a 403(b) or 457(b): read whether its documents name the plan.
Related: whether Wisconsin taxes 401(k) and IRA withdrawals, Wisconsin retirement taxes, whether Wisconsin taxes pensions, 403(b) withdrawal rules, 457(b) withdrawal rules, and state withholding on retirement withdrawals.
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Answer againSources
- How Your Retirement Benefits Are Taxed, Publication 126 (1/26): https://www.revenue.wi.gov/DOR%20Publications/pb126.pdf
- Individual Income Tax Rates (DOR Tax Rates): https://www.revenue.wi.gov/Pages/FAQS/pcs-taxrates.aspx
- IRS Tax Topic 410, Pensions and annuities: https://www.irs.gov/taxtopics/tc410
Sources: the primary documents linked above, read on October 16, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.