Does Mississippi tax retirement income?

Mississippi is one of the states with the lowest  taxes for retirees, giving seniors the opportunity to save significantly compared to other states, due to its exemption to retirement income taxes on the state level. This includes income from Social Security, pensions, and retirement accounts, such as 401(k)s, and IRAs. Additionally, the state has relatively low property and sales taxes.

Mississippi is very tax-friendly for retirees, as all retirement income is exempt from state income taxes. In addition, the state has one of the lowest property taxes in the country, no estate taxes, and close to average sales taxes. However, it may be important to note that federal taxes may still apply.

If you’re near retirement, it might be helpful to consult a financial advisor, who can help you handle all your tax-related concerns and ensure your retirement fund can support your move.

Mississippi taxes all tangible goods and services purchased across the state at 7%,¹ but exemptions may apply. It is also important to note that local sales taxes may apply, which may vary depending on the county. 

Goods such as prescription drugs are exempt from state sales taxes. Mississippi also allows cities and counties to levy additional local taxes on hotels, motels, restaurants, and bars for tourism and economic development. 

However, Mississippi has two sales tax holidays, bringing additional tax benefits. The first is usually during the last weekend of July, which exempts clothing items up to $100 from being taxed. The second sales tax holiday, the Mississippi Second Amendment Weekend, occurs over the first weekend of September. On this weekend, firearms, ammunition, and hunting supplies are free from sales taxes.

As Mississippi has below-average property taxes, it can ease the cost of living for its residents, especially retirees. The effective property tax rate is 0.70%.²

You may also be qualified for the homestead exemption, which offers a credit of up to $300 in property taxes, based on the first $7,500 of the home value. 

Mississippi is one of the states that are free of estate taxes. In case of living in another state but inheriting an estate from someone in Mississippi, you may be liable to pay fees on the inheritance in your state, so you may want to check local laws.

As you now know, Mississippi does not tax retirement income. If you’re considering moving there for retirement, you might first learn about the advantages and potential disadvantages of retiring in Mississippi.

Here are some pros of retiring in Mississippi:

• Low cost of living: Mississippi is one of the states with the lowest cost of living, as its residents pay less for groceries, utilities, gas, and transportation. Additionally, the state has relatively low housing costs.

• Natural beauty: Outdoor enthusiasts have many possibilities to enjoy the natural beauty that Mississippi is offering, including lush forests, scenic rivers, beaches, and geologic rock formations.

• Rural area: Mississippi is ranked as the fourth most rural state in the U.S.. Jackson is the most populous city in the state, followed by Gulfport. As the rest of the towns are mainly rural and at least half of Mississippi’s population lives in rural areas, the state has some of the lowest population densities per square mile in the United States, which could be a benefit to those seeking a quiet and peaceful retirement.

Here are some of the potential disadvantages of living and retiring in Mississippi:

• Hot and humid summers: During summer, Mississippi is prone to reaching temperatures of 90 to 100 degrees Fahrenheit, which makes it one of the hottest and most humid states in the country.

• Natural disasters. With an average of more than 40 tornadoes per year, Mississippi is a high-risk area for natural disasters. Due to its location on the Gulf Coast, the state is also susceptible to hurricanes.

• Access to healthcare facilities: Mississippi ranks lower than average when it comes to access to healthcare facilities and cost and quality of healthcare.

• Limited entertainment possibilities. With a majority of its residents living in rural communities, Mississippi has fewer entertainment options. You might need to travel longer distances to reach theaters, museums, and nightlife.

With a high-interest savings account, you can start building a nest egg for retirement. Explore accounts with competitive interest rates, you can complement your retirement funds, and make the most of your savings potential. Browse through competitive interest rates on high-yield savings products at the Raisin marketplace and start growing your savings today!

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.

Sources

1. https://taxfoundation.org/data/all/state/sales-tax-rates/

2. https://taxfoundation.org/location/mississippi/