Mississippi does not have a state income tax

Mississippi is one of nine states that does not collect income tax on wages, salaries, or other personal income. This means you will not owe Mississippi state income tax on money you earn, regardless of whether you work in Mississippi or live there. You may still owe federal income tax, and you may owe taxes to another state if you work or live elsewhere.

The absence of state income tax does not mean Mississippi has no taxes at all. The state funds its government through sales tax, property tax, corporate taxes, and other revenue sources. Understanding what you do and do not owe in Mississippi can help you plan your finances and avoid confusion at tax time.

Key Takeaways

  • Mississippi residents and workers do not pay state income tax on wages, salaries, self-employment income, or most other personal income.
  • 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 live part of the year in another state, you may owe income tax to that state regardless of Mississippi's policy.
  • Retirees in Mississippi do not pay state income tax on retirement income, Social Security, or pension payments.

What income is not taxed in Mississippi

Because Mississippi has no state income tax, you will not file a state income tax return or pay state income tax on wages from a job, self-employment income, investment income, or retirement income. This applies to residents and non-residents who earn money in Mississippi.

Retirees benefit significantly from this policy. Social Security benefits, pension payments, 401(k) withdrawals, and IRA distributions are not subject to Mississippi state income tax. Military retirement pay and veterans' benefits are also not taxed by the state. If you are planning retirement and considering where to live, the absence of state income tax on retirement income is a real financial advantage in Mississippi.

Interest and dividend income from investments are also not taxed at the state level in Mississippi. Capital gains—the profit you make when you sell an investment for more than you paid for it—are also not subject to Mississippi state income tax.

Taxes you will still owe in Mississippi

Even though Mississippi has no state income tax, you will still owe federal income tax. You must file a federal tax return with the IRS each year if your income exceeds the threshold set by the IRS (the threshold varies by age and filing status). Federal tax rates and rules explore the same way in Mississippi as they do in every other state.

Mississippi residents and businesses pay sales tax on most purchases. The state sales tax rate is 7 percent, though some counties and cities add local sales taxes on top of that, bringing the total to as high as 8 or 9 percent depending on where you shop. Groceries are taxed at a lower rate (3 percent) in Mississippi.

Property tax in Mississippi is based on the assessed value of real estate and is set by county. Rates vary by county but typically range from 0.7 to 1.0 percent of assessed value per year. If you own a home or land in Mississippi, you will receive a property tax bill from your county assessor.

Businesses in Mississippi pay corporate income tax on net income. Self-employed people do not pay Mississippi state income tax, but they do pay federal self-employment tax to cover Social Security and Medicare.

If you work in another state but live in Mississippi

If you live in Mississippi but work in a state that has income tax—such as Tennessee, Louisiana, or Alabama—you may owe income tax to that state. Most states tax income earned within their borders, regardless of where the worker lives. You would file a tax return in the state where you work and pay that state's income tax on your wages.

You may be able to claim a credit on your federal return for taxes paid to another state, which reduces the federal tax you owe. The rules for state tax credits are complex and depend on which state you work in and your specific situation. A tax professional or the IRS website can help you understand whether you may have access to for a credit.

Remote workers who live in Mississippi but work for a company based in another state should check the tax rules of the state where their employer is located. Some states tax remote workers based on where the company is headquartered, while others do not. This is an area where tax law varies significantly, and it is worth confirming your obligations before tax time.

If you live in another state but work in Mississippi

If you live in a state with income tax but work in Mississippi, you will owe income tax to your home state on the wages you earn in Mississippi. Your home state taxes your worldwide income, including money earned out of state. You will not owe Mississippi state income tax because Mississippi does not have one, but your home state will still want its share.

You may be able to claim a credit for taxes paid to Mississippi on your home state's return, though Mississippi does not have income tax to credit. Check with your home state's tax authority or a tax professional to understand your obligations.

Frequently Asked Questions

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

No. Because Mississippi has no state income tax, you do not file a state income tax return. You still file a federal return with the IRS if your income is above the IRS threshold for your filing status and age.

Are Social Security and retirement income taxed in Mississippi?

No. Mississippi does not tax Social Security benefits, pension income, 401(k) withdrawals, IRA distributions, or military retirement pay. This is one of the main tax advantages for retirees in the state.

What if I moved to Mississippi from another state during the year?

You do not owe Mississippi state income tax for any part of the year. If you moved from a state with income tax, you may owe that state income tax for the months you lived there. Contact your former state's tax authority to confirm your filing obligations.

Do I still pay federal taxes if Mississippi has no state income tax?

Yes. Federal income tax is separate from state income tax. You owe federal tax to the IRS based on your income, filing status, and other factors. Mississippi's lack of state income tax does not change your federal tax obligations.

Is sales tax higher in Mississippi because there is no income tax?

Mississippi's 7 percent state sales tax is comparable to other states, though some states without income tax do have higher sales taxes. The relationship between income tax and sales tax varies by state and is based on each state's budget needs and tax policy choices.