Wis. Admin. Code Department of Revenue Tax 14.03 - Household income and income

(1) PURPOSE. This section clarifies the meaning of "household income" and "income" includable in household income as the terms apply to homestead credit claims.

(2) DEFINITIONS. In this section:

(a) "Household income" has the meaning specified in s. 71.52(5), Stats.

(b) "Income" has the meaning specified in s. 71.52(6), Stats.

(3) DEDUCTION FOR DEPENDENTS.

(a) Under s. 71.52(5), Stats., a deduction of $500 is allowed for each of the claimant's dependents, as defined in s. 152 of the Internal Revenue Code, who have the same principal abode as the claimant for more than 6 months during the calendar year to which a claim for homestead credit relates. A claimant may multiply the number of dependents with the same principal abode for more than 6 months by $500 and subtract the result from the total of the income items to arrive at household income.

Example: A claimant and the claimant's spouse claim 3 dependents on their 2014 federal income tax return, and all 3 dependents have the same principal abode as the claimant for the entire year. Household income items include Wisconsin adjusted gross income of $10,500, depreciation of $1,500 and unemployment insurance of $500.

Total household income is $11,000, consisting of the total of the income items listed, $12,500, minus the dependent deduction of $1,500, which is $500 multiplied by 3 dependents.

(b) A dependent is considered to have the same principal abode as the claimant during temporary absences from the claimant's homestead for reasons such as school attendance, illness, vacations, business commitments or military service.

(c) In the following situations, a dependent who does not have the same principal abode as the claimant for more than 6 months during the calendar year to which a claim for homestead credit relates is nonetheless considered to have the same principal abode for more than 6 months if during that year:

1. The dependent is born or dies, and the dependent has the same principal abode as the claimant during the entire time the dependent is alive during that year.

2. The dependent is adopted by the claimant, is placed with the claimant for adoption or becomes the stepchild of the claimant, and the dependent has the same principal abode as the claimant from that time to the end of that calendar year.

(4) ITEMS INCLUDABLE IN INCOME. Under s. 71.52(6), Stats., income includes the sum of:

(a) "Wisconsin adjusted gross income" as defined in s. 71.01(13), Stats., for the calendar year to which a claim for homestead credit relates.

(b) The following amounts to the extent not included in Wisconsin adjusted gross income:

1. Maintenance payments, not including foster care maintenance and supplemental payments excludable under s. 131 of the internal revenue code.

2. Court-ordered support payments, including support for dependents under ch. 49, Stats.

3. Cash public assistance and county relief, including the following:

a. Aid to families with dependent children, or "AFDC."

b. Wisconsin works, or "W-2" payments.

c. Non-legally responsible relative, or "NLRR" AFDC payments or kinship care payments under s. 48.57, Stats. These are payments received as a relative other than a parent, for caring for a dependent child in the claimant's homestead.

d. Cash benefits paid by counties under s. 59.53(21), Stats.

e. Reimbursement from a governmental agency for amounts originally paid for by the recipient, not including cash reimbursements for home energy assistance or for services under Title XX of the federal social security act and community options program, or "COP" payments under s. 46.27, 2017 Stats.

f. Adoption assistance payments under Title IV-E of the federal social security act or from another state, or payments by the Wisconsin department of children and families under s. 48.975, Stats., to adoptive parents of children having special needs as described in s. DCF 50.03 (1) (b).

g. Veterans administration payments for reimbursement of services purchased by the recipient.

h. Federal housing and urban development, or "H.U.D." payments for housing.

i. Disaster relief grants under the federal disaster relief act of 1974.

4. The gross amount of a pension or annuity, including:

a. Railroad retirement benefits.

b. Veterans' disability pensions.

c. Any amounts withheld by the payor.

d. Nontaxable recoveries of cost.

e. Disability income exclusions from taxable income.

Example: Gross amount of a pension. A claimant was entitled to a pension of $8,000 during the year but received only $5,600 after $2,400 was withheld by the payor for payment of health insurance premiums for the claimant. Of the $8,000 pension, $2,000 was a return of the claimant's contribution.

The gross pension of $8,000 must be included in income.

5. Except as provided in subd. 3. e., all payments received for the benefit of a claimant or a member of the claimant's household under the federal social security act, including:

a. All federal social security retirement, disability or survivorship benefits.

b. Lump sum death benefits.

c. Medicare premiums deducted from social security benefits received by all members of a household.

d. Supplemental security income, or "SSI" benefits received by persons over 65 years of age, or blind or disabled.

e. Supplemental security income - exceptional needs, or "SSI-E" payments under s. 49.77(3s), Stats.

6. Compensation and other cash benefits received from the United States for past or present service in the armed forces.

7. Payments made to surviving widows, widowers or parents of veterans by the United States, but not including insurance proceeds received by beneficiaries of National Service Life Insurance.

8. Proceeds from a personal endowment insurance policy or annuity contract purchased by the recipient.

9. The gross amount of "loss of time" insurance proceeds.

10. Nontaxable interest received from the federal government or any of its instrumentalities, or from state or municipal bonds.

11. Scholarship and fellowship gifts or income and other educational grants, not including student loans.

12. Unemployment insurance, including railroad unemployment compensation.

13. Workers' compensation.

14. Capital gains not included in Wisconsin adjusted gross income, but not including a nonrecognized gain from an involuntary conversion under s. 1033 of the internal revenue code.

15. A gain on the sale of a personal residence excluded under s. 121 of the internal revenue code. A gain on the sale of a personal residence which would be reportable under the installment sale method if taxable may be reported either in full in the year of sale or each year as payments are received.

16. Dividends not included in Wisconsin adjusted gross income.

17. Income of a nonresident or part-year resident married to a full-year resident of Wisconsin.

18. A housing allowance provided to a member of the clergy.

19. The amount by which a resident manager's rent is reduced.

20. Income of a Native American which is nontaxable under ch. 71, Stats.

21. Income from sources outside of Wisconsin which is nontaxable under ch. 71, Stats.

22. Nontaxable deferred compensation.

(c) The following items deducted in determining Wisconsin adjusted gross income, including items deducted in arriving at partnership, limited liability company and tax-option "S" corporation income or losses reported as a part of Wisconsin adjusted gross income:

1. Intangible drilling costs.

2. Depletion allowances.

3. Depreciation, including that portion of the standard mileage rate which is determined under the internal revenue code to be depreciation.

4. Expenses deducted under s. 179 of the internal revenue code, regarding the election to expense certain depreciable business assets.

5. Amortization.

6. Contributions to individual retirement accounts under s. 219 of the internal revenue code, including contributions to individual retirement arrangements, or "IRAs," savings incentive match plans for employees, or "SIMPLEs" and simplified employee pension plans, or "SEPs."

7. Contributions to Keogh plans.

8. Net operating loss carryforwards.

9. Capital loss carryforwards.

10. Disqualified losses.

(5) EXCLUSIONS FROM INCOME.

(a) Under s. 71.52(6), Stats., income does not include the following:

1. Amounts described in sub. (4) (b) 1., 3. e., 7., 11. and 14. as not being includable.

2. Gifts from natural persons, including voluntary support payments.

3. Relief in kind by a governmental agency, including surplus food, food stamps and payments directly to a supplier of goods or services, such as medical care, food, clothing and residential energy.

4. The nontaxable portions of lump sum insurance proceeds received:

a. For a recipient's disability or loss of limb.

b. By a beneficiary of a decedent's life insurance policy.

c. From the surrender of any portion of an insurance policy that does not constitute a personal endowment insurance policy or an annuity contract purchased by the recipient.

5. Wisconsin homestead credit amounts received.

6. Social security or SSI payments received on behalf of a claimant's children or the children of the claimant's household.

7. The nontaxable portions of pension, annuity, or other retirement plan payments rolled over from one retirement plan to another.

8. Tax-free exchanges of insurance contracts under s. 1035 of the internal revenue code.

9. Crime victim compensation payments under ch. 949, Stats.

10. Payments under the Wisconsin petroleum cleanup fund act.

11. "Foster grandparents program" payments under the federal domestic volunteer service act of 1973.

12. Community spouse income allowance payments under the Wisconsin spousal impoverishment program, except the portion of the payments includable under Wisconsin marital property law.

Note: The determination of household income under Wisconsin marital property law is described in s. Tax 14.06 (3) (c) 2.

(b) Amounts added to Wisconsin adjusted gross income under s. 71.52(6), Stats., on a previous year's homestead credit claim and subsequently repaid may be subtracted from income for the year during which they are repaid.

(c) Scholarship and fellowship gifts or income included in Wisconsin adjusted gross income, which were included in income under s. 71.52(6), Stats., on a previous year's homestead credit claim may be subtracted from income for the current year.

(6) MARITAL PROPERTY AGREEMENTS. Under s. 71.52(6), Stats., a marital property agreement or unilateral statement under ch. 766, Stats., has no effect in computing income for a person whose homestead is not the same as the homestead of that person's spouse.

(7) INCOME WHILE TEMPORARILY ABSENT FROM HOMESTEAD. Income received while temporarily absent from a homestead shall be included in income.

Example: The net income from rental of a homestead during a planned temporary absence or earnings from seasonal employment away from the homestead is includable in income.

Note: Household income of a claimant who becomes married or divorced during a claim year or occupies a separate dwelling from his or her spouse for any part of a claim year is described in s. Tax 14.06.

Note: Section Tax 14.03 interprets s. 71.52(5) and (6), Stats.

Note: Section 71.01(6), Stats., was revised by 1997 Wis. Act 37, to include provisions of P.L. 105-34, relating to the exclusion of a gain from the sale of a personal residence, effective for sales after May 6, 1997, the same time as for federal purposes. Under the statutes in effect immediately prior to the enactment of 1997 Wis. Act 37, certain gains from the sale of a personal residence could be deferred under s. 1034 of the internal revenue code, and those gains were excludable from income under s. 71.52(6), Stats. In addition, a gain on the sale of a personal residence excluded under s. 121 of the internal revenue code, which was the once-in-a-lifetime exclusion for a qualifying sale by a person age 55 or older, was includable in income under s. 71.52(6), Stats.

Notes

Wis. Admin. Code Department of Revenue Tax 14.03

Cr. Register, February, 1990, No. 410, eff. 3-1-90; renum. (3) to (6) to be (4) to (7) and am. (5) (a) 1., cr. (3), Register, August, 1990, No. 416, eff. 9-1-90; am. (3) (a), (4) (b) 10., 15., 23. d. and f. Register, June, 1993, No. 450, eff. 7-1-93; cr. (2) (intro.) and (4) (b) 5. e., r. and recr. (4) (b) 3. and (5), am. (3) (a), (b) and (c) 2. and (4) (b) (intro.), 2., 5. (intro.) and a., 7., 11., 12., 14., 15. and 20., renum. (4) (b) 23. (intro.) and a. to i. to be (4) (c) (intro.) and 1. to 9. and am. (4) (c) (intro.) and 6., Register, July, 2000, No. 535, eff. 8-1-00; corrections in (4) (b) 3. f. made under s. 13.92(4) (b) 6 and 7., Stats., Register March 2013 No. 687. Amended by, CR 16-046: am. (3) (a), (a) (Example), (4) (b) 23. h., (5) (a) 7. Register January 2018 No. 745, eff. 2/1/2018 Amended by, CR 19-141: r. (4) (b) 23., cr. (4) (c) 10. Register September 2020 No. 777, eff. 10/1/2020 Amended by, CR 22-044: am. (4) (b) 3. e. Register June 2023 No. 810, eff. 7/1/2023

Section 71.52(6), Stats., was amended by 1997 Wis. Act 27, effective for 1998 homestead credit claims filed in calendar year 1999 and thereafter. Under the statutes in effect immediately prior to the enactment of 1997 Wis. Act 27, scholarship and fellowship amounts described in sub. (5) (c) could not be excluded from income.