Short answer: most WRS benefits are taxable income. Federal tax is withheld unless you choose otherwise; Wisconsin tax is withheld only if you ask. Wisconsin offers retirement income subtractions for people who meet age and income rules (below), and your WRS benefit isn't subject to Social Security or Medicare tax. Related: separation benefits, Social Security and annuity adjustments. Estimate your annuity.
Federal
Most WRS benefits are taxable. Pre-tax employee contributions and employer contributions are taxable when paid; after-tax contributions (investment in contract) are not taxed again. Federal withholding defaults to single with no adjustments if you don't elect. ET-4125 (9/17/2026), pp. 2-3, Taxation of Your WRS Benefit / Federal Tax Withholding
Wisconsin
Wisconsin withholding is voluntary; if you don't elect, ETF withholds nothing (form ET-4337). ET-4125 (9/17/2026), p. 3, State of Wisconsin Tax Withholding
If you are not a Wisconsin resident you don't pay Wisconsin income tax on the benefit; ETF can't withhold another state's tax. ET-4125 (9/17/2026), p. 2, Taxation of Your WRS Benefit
Exemptions and subtractions
- Payments from the account of a person who was a member of (or retired from) the State Teachers Retirement System or the Milwaukee Teachers Retirement Fund as of December 31, 1963 are exempt from Wisconsin tax (also their beneficiaries and QDRO alternate payees); not exempt from federal tax.
- Since tax year 2009, people who meet age and income requirements may subtract up to $5,000 of qualified retirement plan income from Wisconsin taxable income.
- Starting with tax year 2025, people at least 67 at the close of the year may subtract up to $24,000 ($48,000 joint if both qualify) of retirement income; those who claim it can't claim any credit on that return.
Social Security and Medicare tax
Not subject to Social Security or Medicare taxes. ET-4125 (9/17/2026), p. 2, Taxation of Your WRS Benefit
Lump sums
20% federal withholding on the taxable part of a lump sum not rolled over; 10% early distribution tax may apply under 59 1/2 unless an exception applies (for example, separation in or after the year you turn 55); Wisconsin adds 33% of the federal 10% (3.3%). ET-4125 (9/17/2026), p. 5, Taxation of Lump-Sum Benefits / Early Distribution Tax
What the sources say
- Most WRS benefits are taxable. The part from pre-tax contributions and employer contributions is taxed; after-tax contributions aren't taxed again.ET-4125 (9/17/2026), p. 2, Taxation of Your WRS Benefit
- Wisconsin tax withholding is voluntary and ETF withholds nothing unless you ask (form ET-4337). If you don't choose federal withholding, ETF must withhold as if you're single with no adjustments.ET-4125 (9/17/2026), p. 3, Taxation of Monthly Annuities
- If you live outside Wisconsin you don't owe Wisconsin income tax on your WRS benefit.ET-4125 (9/17/2026), p. 2, Taxation of Your WRS Benefit
- Wisconsin tax breaks: up to $5,000 of retirement income for people who meet age and income limits; from tax year 2025, up to $24,000 ($48,000 joint) for people 67 or older; and a full exemption for members of the State Teachers Retirement System or Milwaukee Teachers Retirement Fund as of December 31, 1963.ET-4125 (9/17/2026), p. 11, Payments Exempt From Wisconsin Taxes
- WRS benefits aren't subject to Social Security or Medicare taxes.ET-4125 (9/17/2026), p. 2, Taxation of Your WRS Benefit
- A lump sum you don't roll over has 20% federal withholding, may owe a 10% early-distribution tax before 59 1/2 (not if you separate in or after the year you turn 55), and Wisconsin adds 3.3%.ET-4125 (9/17/2026), p. 5, Taxation of Lump-Sum Benefits
Questions
Is my WRS annuity taxable?
Mostly, yes, for federal income tax. The part from after-tax contributions isn't taxed again.
Does Wisconsin tax it?
If you live in Wisconsin, generally yes, with some exemptions and subtractions for older retirees. If you live in another state, Wisconsin doesn't tax it.
Will ETF withhold Wisconsin tax?
Only if you ask. Wisconsin withholding is voluntary.
Ask a tax professional about your own situation.
Source: Your Benefit Handbook (ET-2119), 6/18/2026, with Calculating Your Retirement Benefits (ET-4107, rev 3/5/2025), ET-4125 pp. 2, 3, 5, 11. Last reviewed .