Bill would let Wisconsin taxpayers subtract certain overtime pay from state taxable income

A bill introduced Sept. 29, 2025, in the Wisconsin Legislature would let taxpayers subtract certain overtime pay that meets the Internal Revenue Code definition of “qualified overtime compensation” from state taxable income.

Senate Bill 454, sponsored in the Senate by Senators Rob Hutton, Van Wanggaard, Chris Kapenga (listed in the bill as Kap:emw&cdc header), Van H. and others, and cosponsored in the Assembly, would create a subtraction under s. 71.05 (6) (b) 57. of the statutes for qualified overtime compensation included on statements furnished to claimants under federal or state tax reporting sections cited in the bill.

Under the bill, taxpayers could claim up to $12,500 of qualifying overtime compensation per taxable year; taxpayers who file a joint return could claim up to $25,000. The subtraction would phase out for single filers by $100 for each $1,000 by which modified federal adjusted gross income exceeds $150,000, fully phasing out at $275,000. For joint filers the same $100-per-$1,000 reduction would begin above $300,000 and phase out at $550,000.

The bill requires that only qualified overtime compensation that is included on statements furnished to the claimant pursuant to Internal Revenue Code sections or state reporting provisions identified in the bill is eligible for the subtraction. It also requires claimants to include their Social Security number on the tax return to claim the subtraction; persons considered married under IRC section 7703 may claim the subtraction only if they and their spouse file a joint return for the taxable year. The bill’s statutory text adopts the IRC definition of “qualified overtime compensation” and expressly excludes qualified tips defined in IRC section 224(d).

Senate Bill 454 also amends the definition of “income” used for the homestead credit (s. 71.52 (6)) to reflect the subtraction for qualified overtime compensation. The bill notes that, because it relates to exemptions from state or local taxes, it is referred to the Joint Survey Committee on Tax Exemptions for a report to be printed as an appendix and that a state fiscal estimate will be printed as an appendix.

The bill text lists introduction and sponsorship information and states the measure was referred to the Committee on Agriculture and Revenue. The initial-applicability provision in the bill states the treatment first applies to claims filed for taxable years beginning after Dec. 31, 2024.

The bill language and Legislative Reference Bureau analysis are the source of these details; the document does not record committee action or a legislative vote on the measure.