Mississippi rewrites its tax code and not everyone benefits equally

Several new tax laws reshape Mississippi

Mississippi residents are living through some of the biggest tax changes in the state’s history. Starting in 2026, several new laws are changing what people pay in income tax, sales tax, gas tax, and property tax.

The headline law is the Build Up Mississippi Act, which Gov. Tate Reeves signed on March 27, 2025.

Its long-term goal is to wipe out the state income tax entirely, shifting Mississippi toward a system built on what people spend instead of what they earn.

Income tax falls to 4% this year

Mississippi’s flat income tax rate dropped from 4.4% to 4% on Jan. 1, 2026. The rate kicks in on taxable income above $10,000 per taxpayer.

This cut was already in the works under a 2022 law that started bringing the rate down from 5% in 2023. That law has now made its final reduction.

From here, the Build Up Mississippi Act takes over and keeps pushing the rate lower each year.

The state wants zero income tax

Under the new law, the income tax rate drops by a quarter of a percentage point every year from 2027 through 2030. That means 3.75% in 2027, 3.5% in 2028, 3.25% in 2029, and 3% in 2030.

After that, further cuts depend on whether the state hits certain revenue targets. If those targets hold up, the income tax could disappear entirely by around 2040.

Mississippi would then join Texas, Florida, and neighboring Tennessee as states with no individual income tax.

Grocery tax already came down

Shoppers already got a break. The state sales tax on groceries fell from 7% to 5% on July 1, 2025.

The lower rate covers food and food ingredients that qualify for purchase with SNAP benefits. Prepared meals, restaurant food, and candy still carry the full 7% state rate.

The grocery tax keeps dropping under the new law, and it should reach 2.5% by July 2036.

A new local sales tax arrives in July

Starting July 1, 2026, cities and counties can add a new 1.5% local sales tax on top of the 7% state rate. For most non-grocery purchases, that pushes the combined rate to about 8.5%.

Local governments can vote to opt out before the deadline, but counties that skip it may lose access to certain state infrastructure funds.

The new tax replaces an older system where the state sent about 18.5% of sales tax revenue back to cities.

Gas prices will climb at the pump

Mississippi’s gas excise tax already rose from about 18 cents to 21 cents per gallon in July 2025. On July 1, 2026, it jumps again to 24 cents.

A third bump brings it to 27 cents per gallon on July 1, 2027.

After 2029, the rate can adjust by up to 1 cent every two years, tied to a federal highway construction cost index. All that money goes toward roads and bridges through the Mississippi Department of Transportation.

A new fuel sales tax stacks on top

The excise tax is not the only new cost at the pump. Starting July 1, 2026, the state adds a brand-new 5% sales tax on motor fuel purchases.

Unlike the per-gallon excise tax, this one rises with fuel prices. A $30 fill-up, for example, would tack on an extra $1.50.

The revenue goes to transportation projects.

Combined with the excise tax hike, Mississippi drivers will feel a real difference when they fuel up.

Corporate franchise tax nears its end

Mississippi’s corporate franchise tax dropped to 50 cents per $1,000 of capital over $100,000 on Jan. 1, 2026, down from 75 cents the year before.

This phase-out traces back to the Taxpayer Pay Raise Act, signed by Gov. Phil Bryant in May 2016. The original rate was $2.50 per $1,000, and it has fallen by 25 cents each year since 2018.

Full repeal hits for tax years starting on or after Jan. 1, 2028. The minimum tax stays at $25 no matter what.

Seniors get a bigger property tax break

Homeowners 65 and older can now exempt up to $12,500 of assessed home value from all property taxes, up from $7,500 before. The change applies to exemptions claimed in 2026.

For a home with a true value of about $125,000 or less, a qualifying senior could owe nothing in property taxes. To claim the exemption, homeowners need to apply with their county tax assessor between Jan. 1 and April 1.

State workers gain paid parental leave

State employees got some good news too. The Mississippi State Employees Paid Parental Leave Act took effect Jan. 1, 2026, giving primary caregivers six weeks of paid leave at full salary after a birth or adoption.

Workers need at least 12 straight months of state employment to qualify. The law covers more than 32,000 state agency and university employees.

Public K-12 schools and junior colleges can adopt the policy but are not required to. The bill passed the House unanimously.

Critics say the benefits are lopsided

Supporters argue the tax overhaul will draw businesses to Mississippi and reward workers. Critics see it differently.

The Institute on Taxation and Economic Policy estimates the top 1% of Mississippi households would save an average of about $41,420 a year once the income tax disappears. The bottom 20%? About $42.

The full package could cut state revenues by close to $2.7 billion a year when fully in place, out of a general fund that typically brings in about $7 billion to $8 billion.

Three big changes hit on July 1

Mississippians should circle July 1, 2026, on the calendar.

That is when the new 1.5% local sales tax, the gas excise tax increase to 24 cents, and the new 5% fuel sales tax all land at once. In 2027, the income tax drops again to 3.75%, and gas hits 27 cents per gallon.

After 2030, whether the income tax keeps falling depends entirely on revenue triggers. Residents should check their withholding and budget for higher costs at the pump.

This article was created with AI assistance and human editing.

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