Receiving an inheritance in Wisconsin comes with many questions, including those about state and federal taxes. Fortunately for state residents, changes to federal tax laws in 2013 gave heirs a big break on how much tax may be levied against an inheritance.
The American Taxpayer Relief Act of 2012 (ATRA 2012) effectively ended inheritance and estate taxes for Wisconsin residents and drastically increased the threshold for federal taxes as well. Until the bill’s passage, Wisconsin estate taxes were directly tied to rates on federal inheritance taxes under what is known as a “pickup tax.”
Under the old law, Wisconsin “picked up” a portion of the credit for state death taxes allowed on the federal estate tax return (federal form 706 or 706NA). Because there is no longer a federal credit for state estate taxes on the federal estate tax return, there is no longer basis for the Wisconsin estate tax.