Updated October 7, 2026. Quick answer: Yes. The Department of Revenue’s retired persons FAQ says “The following payments are not exempt from Wisconsin income tax” and lists “Payments from the federal Thrift Savings Plan”. Only the general retirement subtractions can reduce it, such as the new $24,000 subtraction at age 67.
Wisconsin TSP withdrawal tax treatment at a glance
| Item | What the documents say |
|---|---|
| TSP withdrawals | Taxed: TSP payments are not exempt; only the general age-based subtractions can reduce them |
| FERS annuity | Only payments from the federal Civil Service Retirement System may qualify as exempt; FERS is not named in the documents read |
| Rate or limit printed | Subtraction up to $24,000 ($48,000 joint) at age 67 or older, first available for 2025; up to $5,000 at 65 or older |
| Where it is reported | Schedule SB, Subtractions from Income (Form 1) |
| Source | Wisconsin Department of Revenue |
What the Wisconsin documents say
The FAQ lists the federal retirement systems whose payments Wisconsin exempts and then lists what is not exempt. Under “The following payments are not exempt from Wisconsin income tax” it names “Payments from the federal Thrift Savings Plan”. Publication 126 says that only payments from the federal Civil Service Retirement System (CSRS) may qualify as exempt, and that voluntary tax-sheltered deposits “are tax-sheltered annuity benefits and are taxable by Wisconsin”.
Two general subtractions are separate from the exemption. The FAQ says people at least 67 years old may subtract up to $24,000 ($48,000 on a joint return where both qualify) of retirement income, and that “first available for the 2025 taxable year”. Publication 126 describes a subtraction of “may subtract up to $5,000 of qualifying retirement income received” for people 65 or older whose federal adjusted gross income is under $15,000 ($30,000 combined if married).
The $24,000 subtraction has a catch: the FAQ says anyone who claims it “may not claim any credit on their return” for that year.
A worked example at $30,000 of withdrawals
An illustration, not a return: a Wisconsin resident aged 67 or older takes $30,000 from the TSP in 2026 and has no other retirement income. If the $24,000 subtraction applies in full, $6,000 of it stays in Wisconsin income. The documents read print no rate, so no tax figure is computed. Claiming the subtraction means giving up credits for the year.
If you moved to Wisconsin or left it
The rules above are Wisconsin’s own, for a resident. Federal law limits what a state you have left may do: “No State may impose an income tax on any retirement income” of someone who is not a resident or domiciliary of that state, as 4 U.S.C. 114(a) puts it. The statute defines retirement income by reference to plans described in the Internal Revenue Code; this page does not decide whether a particular TSP payment meets that definition. If you moved during the year, check each state’s page and return. See CMG’s TSP withdrawal options and FERS, TSP and Social Security sequencing pages for the federal side.
What changes in 2026
The documents read for Wisconsin announce no change for 2026 that is specific to TSP withdrawals. The instructions read are for tax year 2025, the newest archived; check the state agency for the 2026 forms when they are published.
What the documents do not say
- Neither document prints a Wisconsin tax rate, and neither names FERS. The $24,000 subtraction’s conditions beyond age 67 are in Publication 126 and are not restated here.
Common mistakes
- Treating TSP payments as exempt like a pre-1964 CSRS annuity; the FAQ lists them as not exempt.
- Claiming the $24,000 subtraction and a credit for the same year; the FAQ says claiming the subtraction forgoes the credits.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the withdrawal.
Related: TSP withdrawal options, state tax on TSP withdrawals, Wisconsin retirement taxes, how Wisconsin taxes pensions, and how Wisconsin taxes 401(k) and IRA withdrawals.
Find the right next step for your situation
About how much do you have invested? Pick the range that fits; your next step appears immediately below.
Compare vetted advisors for federal retirement planning
If your portfolio is $250,000 or more, this connects you (free, with no obligation to hire anyone) with 2 to 3 vetted advisors.
Before you start, what actually happens. The matching service is run by WiserAdvisor, an independent advisor-matching company. It opens on their site, asks for your ZIP code and a few questions, and matches you with 2 to 3 vetted advisors. It is free to you.
WiserAdvisor states the service is built for portfolios of $250,000 and above. By submitting, you consent to emails, phone calls and text messages from WiserAdvisor and up to three advisors, so expect to be contacted. Clear Money Guide may earn a referral payment for a qualifying completed form, whether or not you ever hire anyone.
Opens on WiserAdvisor’s site in a new tab.
See how an advisor plans your TSP
Price the destination before you decide. The matching service below introduces you to advisers who pay to meet you.
Before you start, what actually happens. The form is run by Kapitalwise, our advisor-matching partner. Kapitalwise sends your details to advisers who pay for the introduction, so expect calls and texts. Clear Money Guide may earn a referral payment through this service, whether or not you ever hire anyone. This is free to you and there is no obligation to hire anyone.
The Kapitalwise form opens here; you stay on this page.
What happens when you press the button
It asks about nine questions: age, investable assets, location; then your name, email and phone number, and verifies the phone by text. Nothing loads and nothing reaches Kapitalwise until you press the button.
Prefer flat-fee or hourly pricing instead? Compare ranges here.
Answer againSources
- Publication 126, How Your Retirement Benefits Are Taxed (1/26): https://revenue.wi.gov/pubs/pb126.pdf
- Retired persons FAQ (pcs-retired): https://revenue.wi.gov/Pages/FAQS/pcs-retired.aspx
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.