Mississippi is tax-friendly when it comes to retirees. In addition to low tax rates in general, retirees living in Mississippi don’t have to pay any state income tax on qualified retirement income. They also gain an additional bonus exemption on property taxes upon reaching the age of 65.

Mississippi residents benefit from the lowest per capita tax burden in the nation. Kiplinger’s Personal Finance Magazine rates Mississippi sixth in the country and number one in the Sun Belt for least expensive tax state for retirees.

Tax Structure

Income Tax - Qualified retirement income is exempt from state income tax. Social Security is not taxed, regardless of total income. Retirement income from IRAs, 401s/403s, Keoghs and qualified public and state pension plans is not taxable. Interest income from federal securities and obligations of Mississippi and its political subdivisions are all exempt.

The income tax rates are 3%, 4% and 5%. The first $5,000 of taxable income is taxed at 3%, the second $5,000 at 4%, and all above $10,000 is taxed at 5%. A married couple filing joint returns with joint or separate earned income can separate their income, which would allow both individuals to take advantage of the lower rates. There is a standard deduction of $2,800 for single and $3,400 for married filing jointly and/or as head of household. The same itemized deductions for federal income tax apply with the exception of state income tax. Single taxpayers can claim a $6,000 exemption, and those filing jointly or as head of household can claim $9,500. Each additional exemption is $1,500.

Property Tax

Property and automobiles are both subject to ad valorem taxes - meaning that the tax is assessed in relationship to the value of the property.

Residential property used as a residence has a homestead credit $240 against the ad valorem tax. Persons 65 years of age and older or persons who are disabled receive a bonus - these persons are exempt from ad valorem taxes up to $60,000 of the market value on homestead property.

Automobiles are assessed at 30% of market value, and 6% of the assessed value is used as a tax credit.

Your property tax bill includes county, municipal and school taxes. There is no state ad valorem tax. The market value is determined by the local tax assessor, and there is a hearing procedure if you do not agree with the assessment. The taxes vary from city to city depending upon the local rate levied.

Real Estate Tax

There is no state real estate tax.

Sales tax

The state sales tax rate is 7% for most goods and services. There is no local general sales tax, although some areas may have a tourism or hotel/motel tax. The sales tax rate for automobiles is 5%. The following are exempt from sales tax:

• prescription drugs
• residential utilities
• motor fuel 
• newspapers

lntangible Personal Property Tax

There is no intangible personal property tax

Gift Tax

There is no gift tax.

Estate Tax

Estates are taxed at the amount claimed as a state credit on the federal estate return. The first $600,000 is exempt, and no returns are required for estates below that amount. There is no inheritance tax on estates left to the surviving spouse.

Taxes - How they apply to retirees in Mississippi
By Lester Herrington, Deputy Commissioner Mississippi State Tax Commission

Sales Tax

Examples: Auto Repair, Plumbing, Electrical, Heating and Air Conditioning

Exemptions*

• Residential Water, Gas & Electricity
• Prescription Drugs
• Payments made by Medicare & Medicaid
• Health Care Services
• Motor Fuels (Subject to 18 cents excise tax per gallon)

No additional sales tax added by municipalities or counties except on hotels, motels and restaurants and 1/4 of 1% tax in Tupelo.

Property Tax

I. Homestead Property: Assessed at 10% of True Value

Local millage applied to assessed value to determine the tax due annually.

Homestead Exemption:

Under age 65 - Not Disabled
$60,000 Home - Credit of $240

65 and Older or Disabled
Tax Exempt up to $60,000 True Value. Any Value over $60,000 Taxed as Other Property.

Example:

$100, 000 Home True Value
60, 000 Exempt
$40, 000 Taxable

Motor Vehicles

Taxed at 30% of True Value Reduced by a Credit Provided by the Sales Tax Paid on Motor Vehicles.

EXAMPLE:

Income Tax

Rates:

3% on 1st $5,000 taxable income
4%  on next $5,000 taxable income
5% on taxable income over $10,000

Exemptions:

Single - $6,000 Annually
Married (Joint or Combined) - $12,000 Annually
Dependents - $1,500 Annually
65 and Over - $1,500 Annually

Deductions:

Standard
Single - $2,300 Annually
Married (Joint or Combined) - $4,600 Annually

Itemized
Same as IRS reduced by State Income Tax Claimed

Exclusions from Taxable Income:

Social Security Benefits
Retirement Income (Pensions, IRAs, 401Ks, government deferred compensation)
Gains on the Sale of Stock in Mississippi Corporations