Bill would offer tax deductions, refunds, and education funding

Individuals would be allowed to subtract certain qualified tips and overtime pay when calculating Wisconsin taxable income. The provisions would apply to claimants with qualified tips or qualified overtime compensation, including part-year residents and nonresidents. Part-year residents and nonresidents could subtract only the portion tied to income taxable by Wisconsin. The deductions would follow the federal definitions in sections 224 and 225 of the Internal Revenue Code. For tax years beginning after December 31, 2028, claimants could use the subtraction even when the federal rules block the federal deduction. The subtractions would apply to tax years beginning after December 31, 2025, with the special federal-rule treatment beginning after December 31, 2028.

The state would send eligible taxpayers one-time surplus refund payments of $600 for joint filers or $300 for other individuals. Eligible people would be individuals who filed a Wisconsin income tax return for a tax year beginning after December 31, 2023, and before January 1, 2025. A payment could not exceed the taxpayer’s Wisconsin income tax liability for that year. Dependents generally would not qualify, and estates would not receive payments. Part-year residents and nonresidents would qualify only if at least 90 percent of their total income was taxable by Wisconsin. A joint filer’s payment could be reduced if a spouse was claimed as another taxpayer’s dependent; a surviving spouse could receive the full joint payment. The Department of Administration would issue payments no later than September 15, 2026, and taxpayers could file claims for missing or incomplete payments through December 15, 2026.

The Department of Public Instruction would distribute $302.5 million each year to school districts as per-pupil state aid. School districts would receive payments based on pupil averages from current and previous school years, including 40 percent of summer enrollment and specified otherwise excluded pupils. Twenty-five percent would be distributed using the average enrollment from the previous three school years. Seventy-five percent would be distributed using the average enrollment from the current and two preceding school years. The bill would also increase funding for special education and school-age parent programs by $85 million for 2025-26 and $230 million for 2026-27. The per-pupil distribution would begin in the 2026-27 school year; one payment would be due on the third Monday of September, followed by three installments on specified Mondays in December, March, and June.

Technical colleges would receive an additional $50 million each year. The added funding would apply to technical college payments covered by the referenced state aid provision. The $50 million would be added to the amount already provided under the referenced paragraph. The payment depends on funding under the state appropriation. The additional payment would begin in 2027 and continue annually afterward.