Wisconsin taxpayers will not face many surprises when they prepare 2011 state and federal income tax returns, according to the Wisconsin Taxpayers Alliance (WISTAX). The federal extension of early 2000s tax cuts, combined with relatively minor income tax adjustments included in last summer’s state budget, means there are few major tax changes this year.
At the federal level, the most significant change was a payroll tax holiday for employees and the Making Work Pay Credit expiration. The biggest state changes included a deferral for certain capital gains reinvested in qualified Wisconsin businesses and the exempting of health savings accounts (HSAs) from state income tax.
Explanations of these changes and “plain-English” instructions for filing federal and state tax returns are available in Taxes2012, from WISTAX. Now in its 80th year, WISTAX is a nonprofit, nonpartisan organization dedicated to public policy research and citizen education.
State Income Tax Changes
Changes affecting state taxes for the 2011 tax year include:
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Wisconsin excludes from tax 30% of net long-term capital gains. For 2011, filers may also subtract long-term capital gains that are deposited into a segregated account in a financial institution and are invested in a qualified Wisconsin business.
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In aligning state and federal law, health savings accounts (HSAs) are no longer subject to state income taxes.
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The Earned Income Tax Credit percentages for persons with two or more children are reduced.
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Threshold and maximum incomes, and maximum property taxes used to calculate the Homestead Credit are no longer indexed for inflation.
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A new child care deduction of up to $750 (one child) or $1,500 (more than one) is allowed.
Federal Income Tax Changes
Among changes affecting federal taxes for the 2011 tax year are:
- Social security taxes withheld from an employee’s wages are temporarily reduced from a rate of 6.2% to 4.2%. Self-employed persons pay 10.4% (6.2% employer share plus 4.2% employee share).
- The Making Work Pay credit expired at the end of 2010.
- The adoption credit increases to $13,360 (from $13,170).
- The reimbursement rate for business use of a personal vehicle was 51¢ per mile from January through June and 55.5¢ from July through December.
- Personal exemptions increases $50 for 2011 to $3,700.
Taxes2012 can be purchased directly from the Wisconsin Taxpayers Alliance by visiting www.wistax.org, or by writing to WISTAX, 401 North Lawn Avenue, Madison, WI 53704-5033. The single-copy price is $3.95 (including sales tax). Quantity discounts are available. Contact WISTAX at 608.241.9789 or [email protected] for prices.
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