The Oddities of State Taxes — Wisconsin Student Loan Deduction and Nonresident Tax Returns

One of the things I love about my job is that I learn new things every day. And I mean literally, every single day.

An example is something new I learned this past t ax season about the deduction for student loan interest on the Wisconsin tax return for a non-resident taxpayer. ID-10053888

In arriving at Wisconsin-source income on the Wisconsin Form 1NPR, a non-resident taxpayer can deduct 100% of their student loan interest from their Wisconsin-source income. No pro-ration needs to be done; whatever you put on your federal return for a student loan interest deduction is what you put as a deduction in arriving at Wisconsin-source income.

The Form 1NPR has two columns: one that shows the federal amount and one that shows the amount allocated to Wisconsin. I did a triple-check of the Wisconsin instructions on this, but here’s what the form instructions say regarding the deduction for student loan interest:

Line 27 Student loan interest deduction
Federal column Fill in the amount from line 33 of federal Form 1040 or line 18 of Form 1040A.
Wisconsin column Fill in the amount of student loan interest deduction from the federal column.

Almost every other item requires an allocation to figure Wisconsin-source income. But the student loan interest deduction appears to be allowed in full even for non-residents.

I doubt too many other people find this as interesting as I do, but this really fascinated me.

Image courtesy of Stuart Miles /