Wisconsin Capital Gains Tax on Real Estate

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does Wisconsin have a capital gains tax?

Wisconsin capital gains tax is part of the state income tax: there is no separate capital gains rate, and gains are taxed at the same 3.5% to 7.65% rates as wages. What sets Wisconsin apart is a deduction. You may exclude 30% of the net capital gain from assets held more than one year, or 60% for farm assets, according to the Department of Revenue’s Publication 103.

For an apartment building held longer than a year, that means 70% of the gain is taxed. At the top rate of 7.65%, the effective rate on the gain works out to about 5.36%. Gains on property held a year or less get no deduction and are taxed in full.

Wisconsin income tax brackets

Wisconsin has four brackets. The table shows the 2026 thresholds from the Department of Revenue’s 2026 Form 1-ES instructions. For 2025, the 7.65% rate began at $323,290 for single filers and $431,060 for joint filers. The thresholds are adjusted each year, so check the figures for the year you close.

• The 2025 state budget, 2025 Wisconsin Act 15, appears in the history of the rate statute, section 71.06, which sets the current schedule for tax years beginning after 2024.
• The 30% deduction is taken before the brackets apply, so it lowers both the taxable gain and how much of it reaches 7.65%.
• Wisconsin limits net capital losses against other income to $3,000 a year, or $1,500 for a married person filing separately, per the 2025 Schedule WD instructions.

How Wisconsin and federal capital gains tax combine

Each government taxes the gain on its own terms, and you pay both. Federally, long-term gain is taxed at 0%, 15% or 20%, and Revenue Procedure 2025-32 sets the 2026 start of the 20% rate at $613,700 for a joint return and $545,500 for a single filer. The portion of gain equal to depreciation you took is unrecaptured Section 1250 gain, taxed at up to 25%.

The 3.8% net investment income tax applies once modified adjusted gross income is over $250,000 on a joint return or $200,000 for a single filer. Add Wisconsin’s 7.65% on 70% of the gain, and a high-income seller’s combined rate on the capital gain portion runs about 29%, and higher on the depreciation portion.

Your Wisconsin tax helps on the federal return only as part of the capped state and local tax deduction, so on a sale this size most of it is a direct added cost.

Do nonresidents pay Wisconsin tax on a property sale?

Yes. The Department of Revenue says gain or loss from selling Wisconsin real estate must be reported to Wisconsin regardless of where the owner lives. A nonresident or part-year resident files Form 1NPR when Wisconsin gross income is $2,000 or more.

The department also tells sellers that estimated tax on the gain is due at the time of the sale, unless the sale is reported on the installment method, and that this applies even if you had no filing requirement the year before. Payments go in with Form 1-ES. Plan the estimated payment into your closing budget so you are not short when it comes due.

Selling through an LLC or partnership

When a partnership, LLC or S corporation that owns Wisconsin property has nonresident owners, the entity must withhold Wisconsin tax on the income allocated to them, under section 71.775 of the statutes. The rate is 7.65% for individuals, estates and trusts and 7.9% for partners that are partnerships or corporations, reported on Form PW-1.

Withholding is not required for an owner whose share of Wisconsin income from the entity is under $1,000, or for an owner holding a PW-2 exemption letter from the department. A building sale can easily push a small out-of-state member over that line, so ask your CPA to run each member’s share before closing.

Withholding by the entity is a prepayment. Each member still files a Wisconsin return, claims the amount withheld and gets back any excess.

Short-term and long-term gains in Wisconsin

The one-year holding period matters more in Wisconsin than in many states, because it decides whether you get the 30% deduction at all. A building sold after 11 months is taxed on 100% of its gain at Wisconsin rates. One sold after 13 months is taxed on 70%.

Using the couple in the example below, the Wisconsin tax on a $1,230,000 gain would be about $88,840 with no deduction, compared with about $60,611 with it, a difference of about $28,228 at the state level alone. The federal difference is larger, since short-term gain is taxed at ordinary federal rates.

The holding period of the building usually runs from the day you acquired it. For property received in a 1031 exchange, the federal rules generally add the holding period of the property you gave up, so ask your CPA to confirm the dates before you set a closing.

Depreciation recapture in Wisconsin

Wisconsin has no separate recapture rate. Its 30% deduction applies to net capital gain from assets held more than one year, so the treatment of each piece of your gain follows how it is classified on the federal return. Gain that the IRS taxes as ordinary income, such as Section 1245 recapture on personal property identified in a cost segregation study, is not capital gain and gets no deduction.

Basis is where Wisconsin differs most. The state follows the Internal Revenue Code as of January 1, 2014 for depreciation, so it did not adopt federal bonus depreciation passed after that date, including the 2025 law, Public Law 119-21. If you took bonus depreciation federally on improvements or a cost segregation study, your Wisconsin depreciation was lower and your Wisconsin basis is higher. Your Wisconsin gain on sale is then smaller than your federal gain. Wisconsin Schedule T is where that basis difference is worked out.

Keep a separate Wisconsin depreciation schedule and give it to whoever prepares the return for the year of sale. For property you depreciated before 2014, the Schedule WD instructions say your Wisconsin and federal basis are the same as of the start of your 2014 tax year, so the difference comes only from later years.

Worked example: selling a $2M apartment building in Wisconsin

Wisconsin tax uses the 2026 brackets.

A married couple filing jointly sells a 20-unit building in Madison for $2,000,000 and pays $90,000 in selling costs. They paid $1,000,000 for it and have claimed $320,000 of depreciation, all straight-line, for an adjusted basis of $680,000. The gain is $1,230,000: $320,000 of unrecaptured Section 1250 gain and $910,000 of long-term capital gain. Before the sale they have $220,000 of taxable income, MAGI already above $250,000 and a $900,000 mortgage.

Federal tax: the $320,000 of Section 1250 gain at the 25% maximum is $80,000. That slightly overstates it, since part of that gain falls in the 24% bracket. The capital gain sits on top of $540,000 of income, so $73,700 is taxed at 15% ($11,055) and $836,300 at 20% ($167,260). The 3.8% NIIT on the full gain is $46,740. Federal total: $305,055.

Wisconsin tax: the 30% deduction removes $369,000, leaving $861,000 of taxable gain. Added to $220,000, it lifts taxable income to $1,081,000, and the extra Wisconsin tax is about $60,611, roughly 4.93% of the gain. Without the deduction it would be about $88,840. The combined bill is about $365,666, near 30% of the gain. After the loan payoff, the couple nets $1,010,000 before tax and about $644,334 after.

How a 1031 exchange changes the Wisconsin tax

A 1031 exchange defers Wisconsin tax along with federal tax, because Wisconsin follows the Internal Revenue Code as amended to December 31, 2022, which includes Section 1031. In the example, buying a replacement worth at least $1,910,000 and reinvesting all $1,010,000 of net cash would defer the full $365,666.

Wisconsin is not one of the four states that track deferred gain after you exchange into another state; those are California, Massachusetts, Montana and Oregon. Our page on the 1031 exchange in Wisconsin covers exchange paths, intermediaries and a worked example.

Cash you keep in a partial exchange is boot, taxed by both governments in the year of sale. If the boot is long-term capital gain, the 30% Wisconsin deduction applies to it as well. The 1031 exchange calculator runs the federal side for your own numbers.

Ways Wisconsin sellers lower the tax

The 30% deduction is automatic, so the planning work is mostly about timing and basis.

• Hold for more than one year, so the gain qualifies for the 30% deduction.
• Use a 1031 exchange to defer both the federal and Wisconsin tax.
• Use an installment sale to spread gain over years when more of it may fall in the 5.3% bracket.
• Make sure your Wisconsin basis reflects the bonus depreciation Wisconsin did not allow.

Selling a Wisconsin apartment building

Skyline buys apartment buildings with five or more units in Wisconsin, in Milwaukee, Madison, Green Bay and across the state. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you are exchanging, we can schedule the closing around your replacement search and coordinate with your intermediary.

For the property tax line a buyer studies, see the property tax rate in Wisconsin, and for tenant rules that come with the building, Wisconsin landlord-tenant law for apartment owners.