Self-employed in Madison, WI: taxes and retirement for 2026

Guides for Madison

Madison local rules

Local income tax

No city income tax in Madison.

Madison Transient Room Tax (MGO 4.21)

Madison charges a 10% room tax on lodging. Anyone renting rooms or lodging in Madison, including short-term rental hosts, must get a Transient Room Tax permit from City Treasury and file quarterly returns due Jan. 31, Apr. 30, July 31 and Oct. 31.

Also worth knowing

No city income tax. The 10% room tax rate is stated in the city's Room Tax Overview (https://www.cityofmadison.com/finance/documents/RoomTaxCommissionOverview.pdf); it rose from 9% under ORD-17-00110 (2017), and we found no later change. The city issues licenses only for specific business types (https://www.cityofmadison.com/clerk/licenses-permits), not a general business license. Short-term rentals (Tourist Rooming Houses) need a Zoning TRH Permit ($300 one-time application fee plus $100 yearly renewal), a Room Tax Permit and a Public Health Madison & Dane County license. The home must be the host's primary residence, both while renting and for the 12 months before, and rentals are capped at 30 days per licensing year (July 1-June 30) when the host is away (https://www.cityofmadison.com/dpced/building-inspection/zoning-signs/trh/regulations). We found no local gig-worker pay laws.

Wisconsin rules that apply in Madison

State income tax (2026)

Wisconsin has a graduated state income tax for 2026: 3.5% to 7.65% (top rate starts at $332,720 for single filers). Rates are percentages. 2026 single-filer brackets: 3.5% up to $15,110; 4.4% up to $51,950; 5.3% up to $332,720; 7.65% above that. 2025 Wis. Act 15 set new brackets for tax years after 2024 and created a retirement-plan and IRA distribution subtraction for people 67 or older: up to $24,000 ($48,000 on a joint return when both spouses qualify). Anyone who takes that subtraction can't claim the credits listed in Wis. Stat. §71.10(4) that year (Act text: https://docs.legis.wisconsin.gov/2025/related/acts/15.pdf).

State estimated tax

You must pay 2026 estimated tax if you expect to owe at least $500 after withholding and credits, and your withholding will be less than the smallest of these: 90% of your 2026 tax, 100% of your 2025 tax, or 90% of your annualized 2026 tax. Same dates as federal: April 15, June 15, and September 15, 2026, and January 15, 2027. Farmers and fishers may pay once by January 15 or file and pay by March 1. Form 1-ES.

Minimum wage (2026)

$7.25 an hour; tipped cash wage $2.33 an hour. Rates unchanged since July 24, 2009. Opportunity employees (under 20, first 90 days) may be paid $5.90, or $2.13 if tipped. Cities, villages, towns, and counties may not set their own minimum wage (Wis. Stat. §104.001).

Unemployment insurance contractor test (control plus 6 of 9 conditions)

For unemployment insurance, a worker for a general private employer counts as an independent contractor only if they are free from the employer's control or direction. They must also meet at least 6 of 9 conditions, such as holding themselves out as a business, having multiple contracts, carrying their own main expenses, facing profit or loss, and not depending economically on one employer.

Worker's compensation nine-requirement test (Wis. Stat. §102.07(8))

For worker's compensation, a worker must meet all nine requirements to count as an independent contractor. These include running a separate business, having a federal EIN (or having filed business or self-employment returns the prior year), working under specific contracts, and being paid per job, by commission, or by bid. Missing even one makes the worker an employee.

Construction-industry misclassification penalties

Construction employers, including painting and drywall-finishing businesses, that knowingly and intentionally misclassify employees as independent contractors face fines. The civil penalty is $500 per misclassified employee, up to $7,500 per incident. Pressuring workers into contractor status costs $1,000 per person, up to $10,000 a year. Repeat offenders who were already penalized can face a criminal fine of $1,000 per misclassified employee, up to $25,000.

Questions

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Sources

• www.revenue.wi.gov/TaxForms2026/2026-Form1-ES-Inst.pdf
• dwd.wisconsin.gov/er/laborstandards/minimumwage.htm
• dwd.wisconsin.gov/worker-classification/ui/allothers/conditions/
• dwd.wisconsin.gov/worker-classification/wc/ninepart/
• dwd.wisconsin.gov/worker-classification/report.htm
• www.cityofmadison.com/finance/treasury/transient-room-tax

Facts researched from official sources and independently re-checked; last verified October 2026, next scheduled review 2027-01-02. Educational information for 2026, not tax, legal or investment advice. Rules change; check the official sources listed and a tax professional for your situation. Gigaverse AI, Inc. is a financial technology company, not a bank, and not itself a registered investment adviser or broker-dealer.