Military pay that is exempt for federal tax purposes is also exempt for Wisconsin. For example, military pay that qualifies for the federal combat pay exclusion is also exempt for Wisconsin tax purposes.
Note: A qualified hazardous duty area (the Sinai Peninsula of Egypt) is treated in the same manner as if it were a combat zone for purposes of the exclusion of certain combat pay of members of the armed forces.
In addition, if you were a member of the Reserves or National Guard and served on active duty, you may subtract any military pay that is included on your W-2 and meets all of the following:
- Received from the federal government
- Received after being called into active federal service or into special state service authorized by the federal Department of Defense
- Paid to you for a period of time during which you were on active duty
CAUTION: The subtraction only applies to members of the Reserves or National Guard who are called into active federal service under 10 USC 12302(a), 10 USC 12304, or 10 USC 12304b or into special state service under 32 USC 502(f). However, it does not apply to pay that members of the Reserves and National Guard receive for their weekend or two-week annual training. It also does not apply to a person who is serving on active duty or full-time duty in the active guard reserve (AGR) program.
An additional subtraction is allowed for the amount of basic, special, and incentive pay received from the federal government under 37 USC chapters 3 and 5 during the period that members of the U.S. Armed Forces are on active duty. A member of the U.S. Armed Forces includes all regular and reserve components subject to the following jurisdictions, including the Coast Guard and commissioned officers and personnel below the grade of commissioned officers in these forces:
- Secretary of Defense
- Secretary of the Army
- Secretary of the Navy
- Secretary of the Air Force
DOR Individual Income Tax Military (wi.gov)