WI Residents Now Save on Energy Bills
Authored by: Diane Payne — Partner, EA | Date Published: October 24, 2025
Wisconsinites know that their energy bills are tax-exempt during the months their heat is fighting the wintery cold. However, household energy bills in Wisconsin just became permanently tax-exempt. While this may sound like a simple “pay less” scenario, it has meaningful implications for household budgeting, public finances, and how households should approach energy costs from a tax lens.
We’ll explain why this happened, what exactly changed, and how it matters for your household’s accounting mindset (even if you’re not a professional).
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Key Changes You Should Know
Starting on October 1, 2025, Wisconsin households will no longer pay sales tax on energy and utility bills as part of Governor Evers’ budget plan. Previously, Wisconsin residents received a sales tax exemption from November through April; the new sales tax exemption will occur year-round.
The Wisconsin Tax Code states that this tax exemption is for permanent residences only. The tax exemption does not apply to commercial properties, seasonal homes, cabins, vacation rentals or RVs.
Think of the new tax changes like a discount. Even though your total statement will go down, your actual energy consumption or base rates might go up due to market factors. The tax removal will help offset that cost.
Let’s look at the numbers:
Your household’s monthly utilities (before tax) are $200 for October 2025. Normally, you would pay an additional $10 in tax. Under the new exemption, your total amount remains at $200; hence, you save $10 that month.
Suppose in 2026 your base usage increases by 3% due to colder weather or rate changes, now set at $206. Even with that increase, you’d still avoid paying tax, making your “apparent increase” smaller than it would have been. You’re looking at hundreds of dollars in savings.
Something worth noting is that this is an automatic tax break that does not require any special action from Wisconsin residents. The sales tax is simply removed from the billing process, and you can enjoy your heat or air conditioning in peace.
What Caused the Tax Changes?
If you’ve been dreading your monthly energy statement as it climbs with each brutal winter and sudden heat wave in the summer, you’re not alone. Lawmakers have finally taken notice.
Here are the motivating forces of the tax changes:
- Alleviate Household Cost Pressures: Energy costs have been rising from factors like higher natural gas prices, grid maintenance, and increased demand. The tax exemption is meant to ease the burden, particularly for low- and middle-income households.
- Bipartisan Support: This measure is part of the 2025–27 biennial budget passed with bipartisan support. The state expects that the revenue loss will be manageable in the context of its overall budgetary priorities (K–12 funding, UW system, etc.).
- Equity and Relief Mechanism: Because energy use is a necessity, removing tax can be seen as more equitable relief than cutting a tax on luxury goods. It helps all eligible residents, not just those with enough income to benefit from income tax credits or deductions.
In short, this tax change aims to put money back in your pocket when you need it most, whether you’re heating your home in January or cooling it in July.
Immediate Tax Impacts on WI Residents
Many people think of taxes as something only relevant at filing time, but this change has implications for household accounting, budgeting, and even financial planning.
Here’s how to think about it from a financial planning perspective:
Cash Flow Impact
Less tax = lower monthly payments, so your cash flow will be directly improved.
From a household “income minus expenses” standpoint, your net disposable cash increases. You may choose to redirect those savings into emergency funds, debt payoff, or other uses.
Accounting for Utility Costs
If you keep a simple “household accounting” ledger, your utilities line item will now drop by about 5%, improving your net surplus.
Don’t confuse tax savings with reduced consumption. For someone comparing year-over-year utility line items, it’s important to note that a 5% reduction is from the tax, not usage. If your consumption increases, your base costs could still rise. Make sure your “apparent improvement” isn’t overstated by looking at the total and always separating tax components when making comparisons.
No Change to Income Tax or Deductions
For most individuals, this exemption does not affect your federal or state income tax return. You are not getting a deduction or credit, just not being charged tax at the point of sale. Thus, your taxable income or itemized deductions are unaffected.
However, if someone had been deducting utility sales tax, that deduction component would change. Generally, utilities are not a separate line of deduction for individuals.
Implications for Rental & Business Properties
Because the exemption applies only to permanent residential households, businesses, commercial properties, and rental properties will not be exempt. That means:
- A landlord whose property is treated like a business might still pay tax on utilities.
- If you sub-meter or charge tenants for utilities with a markup, the tax implications might differ.
- For small businesses located within home-based offices, some approval may be required.
Accounting for mixed-use properties requires careful allocation of which portion of utility consumption is exempt. Consider meeting with an advisor to properly file for the upcoming tax season.
Long-Term Tax Considerations
From a public accounting perspective, this change means Wisconsin will waive a recurring revenue stream on energy consumption by households. Over the next two years, the estimated “cost” is $178 million in dropped tax revenue. That revenue will then be generated elsewhere, likely from other taxes, spending cuts, or increased borrowing.
For local governments or municipal energy programs, they may see indirect effects: if state funding is tighter, programs tied to energy rebates, weatherization, or infrastructure may face pressure.
The tax exemption helps everyone, but targeted assistance programs remain crucial for households struggling with energy costs.
Continue to explore:
- Weatherization assistance programs
- Energy bill payment assistance
- Home energy efficiency rebates
- Low-income heating assistance
Common Questions About the WI Energy Bill Tax Exemption
You may be wondering how this exemption directly impacts your utilities, when you’ll see the savings, and whether there’s anything you need to do immediately.
We can answer your questions regarding the new tax exemption:
Q: Will local (municipal) utility taxes still apply?
The change is for state sales tax on energy and utility bills. It does not necessarily eliminate local or utility-company-imposed surcharges. Always examine your bill breakdown.
Q: How will billing systems adapt?
Utility companies will have to update their billing systems to remove the tax portion. During transition months, like October, there might be misapplied taxes or credits to settle.
Q: Could this lead to higher base utility rates?
If the state revenue shortfall causes pressure, utilities or regulators might raise base rates or fees to recoup costs, which could break down the benefit over time.
Q: What about low-income / assistance programs?
The exemption helps everyone, but lower-income households will benefit the most. Still, targeted assistance like rebates and weatherization remains important.
Q: How will this affect comparative analysis year-over-year?
When comparing utility expense lines across years, you’ll want to adjust for the tax removal. A 5% “drop” in your bill after October 2025 doesn’t necessarily mean you used 5% less energy. Remember that part of the drop is the tax.
Conclusion
Wisconsin’s year-round elimination of sales tax on residential energy bills represents meaningful savings for households across the state. While the percentage might seem modest, savings will be seriously realized, especially during high-usage months.
The key: Understanding what’s actually changing on your statement, tracking your savings accurately, and using this financial buffer strategically. Whether you redirect the funds toward financial goals or simply enjoy a lower monthly expense, this tax exemption is a highly welcomed change for Wisconsin residents.