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 taxes sixth in the country and number one in the Sun Belt for least expensive tax states 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 private pension plans is not taxable. Interest income from federal securities and obligations of Mississippi and its political subdivisions are all exempt.
The state's 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 $2,300 for single and $4,600 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 married filing jointly can claim $12,000. Each additional exemption for dependents or for 65 and over 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 of $300 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 $75,000 of the market value on homestead property. Any value over $75,000 is taxed as other property.
Automobiles are assessed at 30% of market value, and the tax is reduced by a percentage assigned by the Legislature.
Your property tax bill includes county, municipal and schooltaxes. 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 small 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
* health care services
* payments made by Medicare and Medicaid
Intangible Personal Property Tax - There is no intangible personal property tax.
Gift Tax - There is no gift tax.
Estate Tax - On estates of decedents who die after January 1, 2000, Mississippi Estate Tax is the amount of credit allowed on the Federal Estate Tax Return for State estate taxes paid.
For more information on Mississippi taxes, visit the Mississippi Department of Revenue web site http://www.dor.ms.gov/