Mississippi does not have a state income tax

Mississippi is one of nine states that does not collect a state income tax on wages, salaries, or other earned income. This means you will not owe Mississippi state income tax on money you earn, regardless of how much you make or where you work in the state.

However, the absence of state income tax does not mean Mississippi has no state taxes at all. The state funds its operations through sales tax, property tax, corporate taxes, and other revenue sources. If you live or work in Mississippi, you still owe federal income tax to the IRS, and you may owe taxes to other states depending on your situation.

Key Takeaways

  • Mississippi does not tax wages, salaries, or other earned income at the state level.
  • You still owe federal income tax to the IRS even though Mississippi has no state income tax.
  • Mississippi funds state services through sales tax (currently 7 percent statewide), property tax, and corporate taxes instead.
  • If you work in another state or are a nonresident, you may owe income tax to that state even if you live in Mississippi.
  • Retirees in Mississippi do not pay state income tax on retirement income, pensions, or Social Security benefits.

How Mississippi funds state services without income tax

Mississippi relies on a sales tax as its primary revenue source. The statewide sales tax rate is 7 percent, though some counties add local sales taxes on top of that, bringing the total to as high as 8 percent or more depending on where you shop. This means you pay tax when you buy goods and services rather than when you earn money.

The state also collects property tax, which is assessed on real estate and sometimes personal property. Property tax rates vary by county and municipality. Additionally, Mississippi taxes corporate income and has excise taxes on items like gasoline, alcohol, and tobacco. These revenue streams replace what other states collect through income tax.

Federal income tax still applies in Mississippi

Living in a state with no income tax does not exempt you from federal taxes. You must file a federal income tax return with the IRS if your income exceeds the threshold set by the federal government. For 2024, that threshold depends on your age, filing status, and type of income, but single filers under 65 generally must file if they earned $14,000 or more.

The federal tax system is separate from state systems. The IRS collects federal income tax from residents of all 50 states, including Mississippi. Your federal return is due to the IRS by April 15 each year, and you cannot skip it just because Mississippi does not have a state income tax.

Nonresidents and multistate workers in Mississippi

If you live in Mississippi but work in another state, that other state may tax your income. For example, if you live in Mississippi and work in Tennessee (which also has no income tax), you owe no state income tax. But if you work in Louisiana or Arkansas, those states may tax your wages even though you live in Mississippi.

The rule is generally that you owe income tax to the state where you earned the money, not necessarily where you live. Some states have reciprocal agreements that change this, so your situation depends on which state you work in. If you are unsure, contact the tax authority in the state where you work to confirm your filing requirements.

Retirement income and pensions in Mississippi

Mississippi does not tax retirement income, pensions, or Social Security benefits at the state level. This means retirees keep more of their retirement money compared to residents of states with income tax. If you receive a pension from a former employer, Social Security, or distributions from a retirement account like an IRA or 401(k), Mississippi will not tax those payments.

This benefit applies only to Mississippi state tax. You may still owe federal income tax on some retirement income depending on your total income and the type of retirement account. Federal rules on Social Security taxation and retirement account withdrawals are separate from state rules.

What to do if you file taxes in Mississippi

Since Mississippi has no state income tax, you do not file a state income tax return. You only file a federal return with the IRS. If you are self-employed or have business income, you still owe federal self-employment tax and federal income tax, but no Mississippi state tax.

If you moved to Mississippi from another state during the year, you may need to file a part-year resident return in your former state. Contact that state's tax authority to confirm. You should also update your W-4 form with your employer if you moved, since your federal withholding may change based on your new address and filing status.

Sales tax and other taxes you will pay in Mississippi

Even though you do not pay income tax in Mississippi, you will pay other taxes. The statewide sales tax of 7 percent applies to most purchases of goods and some services. Groceries are generally exempt from sales tax in Mississippi, but prepared food, clothing, and most other items are taxed.

You will also pay property tax if you own real estate in Mississippi. The rate varies by county but is typically between 0.7 and 1.0 percent of the assessed property value annually. If you own a vehicle, you pay registration fees and may owe property tax on the vehicle depending on your county. Gasoline, alcohol, and tobacco also carry excise taxes.

Frequently Asked Questions

Do I have to file a Mississippi state income tax return?

No. Mississippi does not have a state income tax, so you do not file a state return. You only file a federal return with the IRS if your income is above the federal threshold. Some counties or cities may have local taxes, but those are separate from state income tax.

If I work in Mississippi but live in another state, do I owe Mississippi tax?

Probably not. You typically owe income tax to the state where you earned the money. Since Mississippi has no income tax, you would not owe Mississippi tax. However, you may owe tax to your home state depending on its rules. Check with your home state's tax authority to be sure.

Are there any Mississippi state taxes I do have to pay?

Yes. You pay sales tax (7 percent statewide), property tax if you own real estate, vehicle registration fees, and excise taxes on gas, alcohol, and tobacco. Mississippi funds state services through these taxes instead of income tax.

Does Mississippi tax Social Security or retirement pensions?

No. Mississippi does not tax Social Security benefits, pensions, or retirement account withdrawals at the state level. You may still owe federal income tax on some retirement income depending on your total income and the type of account.

What if I am self-employed in Mississippi?

You do not owe Mississippi state income tax on self-employment income. You do owe federal self-employment tax and federal income tax to the IRS. Keep records of your business income and expenses for your federal return.