If you’re looking at moving to the Magnolia State or just trying to figure out why your paycheck looks a little light, you’re probably asking: does Mississippi have a state tax?
The short answer is yes. But honestly, it’s not that simple anymore.
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Mississippi is currently in the middle of a massive tax identity crisis. For decades, it was a standard "income tax state." Now? It’s trying to join the ranks of Florida and Texas. Governor Tate Reeves made a huge splash recently by signing the "Build Up Mississippi Act," which basically puts the state’s individual income tax on a slow-motion chopping block.
If you live there right now, you’re still paying. But the rules are changing faster than a summer thunderstorm in the Delta.
The Income Tax Reality in 2026
Kinda surprisingly, Mississippi has moved to a flat tax system. Forget those complicated brackets where you had to figure out if you were in the 3% or 5% range.
For the 2026 tax year, the math is straightforward:
- The first $10,000 of your taxable income is totally exempt. You pay $0.
- Everything above that $10,000 mark is taxed at a flat 4.0%.
That 4.0% rate is a big deal because it used to be much higher. Just a couple of years ago, the top rate was 5%. The state has been shaving off fractions of a percent every year like a carpenter sanding down a rough edge.
Is it going to zero?
That’s the million-dollar question. Or rather, the billion-dollar budget question.
The plan is to keep cutting by 0.25% every year until it hits 3% in 2030. After that, things get "trigger-happy." The tax won't just vanish automatically; the state has to hit specific revenue targets. If the economy is booming and the state treasury is full, the tax keeps dropping. If things get lean? The cuts might pause.
Experts like those at the Tax Foundation or the Institute on Taxation and Economic Policy (ITEP) have pointed out that this makes Mississippi one of the most aggressive "tax-cutting" states in the country right now.
Sales Tax: The "Gotcha" Moment
While the income tax is shrinking, the sales tax is very much alive and well. In fact, it’s one of the highest in the nation.
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Mississippi’s base state sales tax is 7%.
You’ll feel this every time you buy clothes, electronics, or a truck. And unlike some states that let you off easy on the local level, some Mississippi cities add their own 1% on top of that, especially in touristy areas or big hubs like Jackson or Gulfport.
The Grocery Tax Relief
There is some good news here, though. For the longest time, Mississippi was one of the few states that taxed groceries at the full 7% rate. It was brutal for family budgets.
Starting in July 2025 and continuing into 2026, that grocery tax has been slashed to 5%.
It’s still not zero—unlike neighbors like Louisiana—but it’s a significant drop. Basically, if an item is "SNAP-eligible" (meaning you could buy it with food stamps), it qualifies for the lower 5% rate. If you’re buying beer, cigarettes, or hot prepared rotisserie chicken? You’re still hit with the full 7%.
What About Property and Retirement?
If you're a retiree, Mississippi is actually a bit of a hidden gem.
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The state does not tax Social Security benefits. It also doesn't tax withdrawals from 401(k)s, IRAs, or public/private pensions, provided you’ve met the retirement requirements. This is a massive "pro" in the column for anyone looking to settle down in a place like Ocean Springs or Oxford.
Property taxes are also relatively low compared to the national average. The "effective" rate usually hovers around 0.58%.
There's also a "Homestead Exemption" that’s been beefed up for 2026. If you’re over 65 or totally disabled, you can exempt up to $12,500 of your home’s assessed value from property taxes. For a lot of seniors, this effectively wipes out their property tax bill entirely on a modest home.
The Hidden Taxes: Cars and Gas
Don’t get too excited about the low property taxes until you look at your car tag.
Mississippi hits you hard on "Ad Valorem" taxes for vehicles. When you go to get your tag at the courthouse, the price is based on the value of your car. A brand-new $50,000 SUV could easily cost you $800 to $1,000 just for the privilege of putting a piece of metal on the back of it.
The gas tax is currently around 21.4 cents per gallon. It’s pretty average, but keep in mind that as the state moves away from income tax, there’s always talk in the legislature about bumping up "consumption" taxes like this to make up the difference.
Why Does Mississippi Have a State Tax at All?
You might wonder why they don't just flip a switch and go to zero today.
State services like the Highway Patrol, the Department of Health, and public schools rely on that income tax revenue. Right now, income tax brings in about 18% of the state’s total tax collections. It’s not the biggest slice of the pie (sales tax is the king in Mississippi), but it’s enough that losing it all at once would cause a massive budget hole.
States like Tennessee or Florida can afford no income tax because they have massive tourism industries or different corporate structures. Mississippi is still trying to figure out how to balance the books while being "business-friendly."
Actionable Next Steps for You
If you're living in or moving to Mississippi, here is how you should handle the 2026 tax landscape:
- Adjust your withholding: Since the rate dropped to 4.0% for 2026, check your paystub. You might be overpaying the state every month. Talk to your HR department about updating your Form Rule 89-700 (the Mississippi version of the W-4).
- Track your "SNAP" items: When you're at the grocery store, keep an eye on your receipt. If you see 7% charged on bread or milk, the retailer hasn't updated their system to the new 5% rate.
- Plan your car purchase: If you're buying a new car, remember that the "sales tax" is 5% at the dealership, but the "ad valorem" tax at the tag office is a separate, recurring annual cost based on the car's value.
- Max out the Homestead: If you just bought a house, you must go to the tax assessor's office between January 1 and April 1 to apply for the Homestead Exemption. If you miss that window, you’re stuck paying the full rate for the whole year.
Mississippi's tax system is definitely "in flux." It's becoming a much cheaper place for high-earners and retirees, though the high sales tax keeps the burden heavy on everyday spending. Keep an eye on those "triggers" after 2030; that’s when we’ll see if the state actually joins the "no income tax" club for real.