Mississippi does not tax most retirement income. Social Security benefits, pensions, 401(k) and IRA distributions, and military retirement pay are all fully exempt from state income tax, with no income cap and no age requirement. Other money you bring in during retirement — wages from a part-time job, capital gains, rental income, ordinary dividends — is taxable, but at a flat 4% for the 2026 tax year after generous exemptions and deductions.
What’s Exempt
Mississippi’s tax code excludes income received as a retirement allowance, pension, or annuity from any plan that qualifies under the Internal Revenue Code. That one provision does most of the work, and it covers:
- Social Security benefits, even the portion the IRS treats as taxable federally
- Public and private employer pensions, including payments from the Mississippi Public Employees’ Retirement System
- Railroad Retirement Act and Federal Civil Service Retirement Act payments
- Distributions from 401(k)s, 403(b)s, traditional IRAs, SEP IRAs, and SIMPLE IRAs
- Qualified Roth IRA distributions, treated the same way Mississippi treats them under the Internal Revenue Code1Justia Law. Mississippi Code 27-7-15 – Gross Income Defined
- Military retirement pay, including Survivor Benefit Plan payments2U.S. Department of Veterans Affairs. Unlocking Veteran Tax Exemptions Across States and U.S. Territories
The exemption follows the money to a surviving spouse or other beneficiary. A widow collecting on a deceased husband’s pension pays nothing to Mississippi on that income.
When the Exemption Doesn’t Apply
The break depends on the distribution being “qualified” under federal rules. A few common situations fall outside that line.
Early withdrawals are the most frequent one. Pull money from a retirement account before age 59½ without meeting a federal exception, and Mississippi treats the distribution as taxable income. The state doesn’t add its own early-withdrawal penalty, but the money itself lands on your state return. Excess contributions reported on federal Form 5329 are handled the same way.
Non-qualified deferred compensation and non-qualified annuities also fall outside the exemption. They don’t meet the Internal Revenue Code requirements that trigger the state exclusion.1Justia Law. Mississippi Code 27-7-15 – Gross Income Defined
Investment income earned outside a retirement account is not a retirement allowance under the statute, regardless of your age. Dividends from a brokerage account, capital gains on a stock sale, interest on a savings account — all taxable, even if you think of them as retirement money.
How Mississippi Taxes Everything Else
Anything that isn’t exempt falls under Mississippi’s regular income tax. For the 2026 tax year, the first $10,000 of taxable income is exempt and everything above it is taxed at a flat 4%.3Mississippi Department of Revenue. General Information – Section: Tax Rates The rate is scheduled to drop to 3.75% in 2027 and to 3% by 2030, with further cuts tied to state revenue targets.
The taxable side of a typical retiree’s picture usually looks like capital gains from selling stocks or property, dividends and interest from brokerage and savings accounts (interest on U.S. government obligations is exempt), wages from part-time or consulting work, and rental income.
Personal Exemptions and the Standard Deduction
Before the 4% rate applies, Mississippi gives you a personal exemption: $6,000 for single filers, $12,000 for married couples filing jointly, and $9,500 for head of household.4National Finance Center. Mississippi State Income Tax Withholding On top of that, you take either the standard deduction — $2,300 single, $4,600 joint, $3,400 head of household — or itemized deductions, whichever is larger.5Mississippi Department of Revenue. General Information – Section: Deductions
A Worked Example
Take a single retiree with $40,000 in combined Social Security and pension income plus $30,000 in dividends from a taxable brokerage account. The $40,000 is completely exempt. Subtract the $6,000 personal exemption and $2,300 standard deduction from the $30,000, leaving $21,700 in taxable income. The first $10,000 is exempt, so the 4% rate applies to $11,700. The state tax bill: $468 on $70,000 of total income.
Do You Even Need to File?
Mississippi requires a return when a single resident’s gross income exceeds $8,300 (plus $1,500 per dependent), or when a married couple’s combined gross income exceeds $16,600 (plus $1,500 per dependent).6Mississippi Department of Revenue. General Information – Section: Filing Requirements Because Social Security, pensions, and qualified retirement distributions don’t count as taxable gross income, a retiree living entirely on those sources generally has nothing to report and no filing obligation.
One reason to file anyway: if Mississippi tax was withheld from any of your payments during the year, filing a return is the only way to get it back.
Property Tax Relief at 65
Mississippi’s homestead exemption has a stronger tier for homeowners who are 65 or older, or totally disabled. To qualify, you have to turn 65 by January 1 of the tax year and own and occupy the home as your primary residence.7Mississippi Department of Revenue. Homestead Exemption
The senior exemption zeros out property tax on the first $7,500 of assessed value. Mississippi assesses owner-occupied homes at 10% of true market value, so $7,500 in assessed value equals $75,000 in market value. If the home is worth $75,000 or less, the property tax bill is zero. Above that, you pay only on the assessed value over $7,500.
The exemption also freezes your home’s assessed value once you qualify, so later increases in market value don’t push up your tax bill. It isn’t automatic. You have to apply between January 1 and April 1 of the year you turn 65.
No Estate or Inheritance Tax
Mississippi imposes no state estate tax, inheritance tax, or gift tax. No estate tax return has been required for deaths on or after January 1, 2005.8Mississippi Department of Revenue. Estate Whatever you leave behind faces only federal estate tax rules, and the 2025 federal exemption of $13.99 million per person shelters most estates entirely.
The Sales Tax Trade-Off
Mississippi’s kind treatment of retirement income comes with a catch on the spending side. The general sales tax rate is 7%, near the top of the national range, and unlike most states, Mississippi taxes groceries — at a reduced 5% rate, but still.9Mississippi Department of Revenue. Sales Tax Rates
For a retiree on a fixed budget, that grocery tax is a real line item that doesn’t exist in most states. It won’t wipe out what you save by having pensions and Social Security go untaxed, but it belongs in any honest cost-of-living comparison. Prescription drugs are exempt from Mississippi sales tax, which softens the blow for retirees with meaningful pharmacy costs.