An Employer’s Guide to Mississippi Income Tax

Understanding Mississippi’s income tax system is key to accurate payroll and compliance. The state is in the middle of a major tax reform, moving from a graduated system to a flat rate, with plans to eliminate income tax in the next decade.

If you hire workers in Mississippi, these changes are bound to impact your business. The reform will affect employer obligations and payroll operations, not to mention individual employees.

Deel streamlines payroll management and compliance with US federal and state regulations. Here’s what you need to know about Mississippi income tax, including rates, deductions, and filings.

What makes Mississippi’s income tax unique

Mississippi state tax is undergoing a major reform. The state moved from a graduated model to a flat rate and recently voted to cut income tax, making it the first to do so in US history.

Before 2023, Mississippi had three tax brackets based on income levels. That changed when the state passed House Bill 531 to eliminate the lower rates and gradually reduce the highest one. Then, in 2025, Governor Tate Reeves signed the Build-Up Mississippi Act to eliminate the state’s income tax altogether.

Policymakers aim to lower Mississippi’s income tax rate year-on-year until it reaches 3% in 2030. They will continue decreasing it based on the state’s economic performance after this point.

How income tax works in Mississippi

The Mississippi Department of Revenue (DOR) is the overseeing agency within the state. It administers all state income tax collection and enforces the regulations.

Individuals and businesses can register with the Mississippi DOR for withholding and filing through the Taxpayer Access Point (TAP) online system. This system not only enables you to upload documents but also check the status of refunds and returns, and contact the support team for assistance.

Mississippi uses the taxpayer’s adjusted gross income (AGI) as the starting point for income tax. That’s the number calculated for each worker’s federal tax return after adjustments like IRA deductions and student loan interest. It then applies state-specific additions and subtractions to determine the total taxable income.

Here are the types of taxable income in Mississippi as of 2025:

• Wages, salaries, and tips
• Business income
• Capital gain
• Rent and royalties
• Farm income
• Interest and dividends
• Alimony
• Certain types of pension
• Unemployment compensation

Mississippi generally follows the federal definition of income but differs in one key aspect: The state doesn’t tax US Social Security payments and railroad benefits.

Residency rules and filing status

Income tax filing status in Mississippi is based on your residency. There are three overall categories:

• Residents: People who live in Mississippi for more than 183 days in a financial year count as residents. They’re taxed on income from both inside and outside the state and file Form 80-105
• Non-residents: Anyone earning income in Mississippi but living elsewhere must pay taxes on this amount and file Form 80-205
• Part-year resident: If someone moved into or out of Mississippi during the tax year, they only pay taxes on what they earned there. They must also file Form 80-205

Mississippi uses the same filing statuses as on the federal return:

• Single
• Married filing jointly
• Married filing separately
• Widowed during the tax year
• Head of family

Mississippi income tax rates and brackets

The Mississippi state income tax rate for 2025 is:

• 0% on the first $10,000
• 4.4% on everything over $10,000

In 2026, the rate is decreasing to 4% but the tax-free limit will remain the same.

Mississippi doesn’t allow local income taxes. Full-time residents there only have to make payments and file returns to the federal and state governments.

Mississippi income tax reductions

Taxpayers in Mississippi can benefit from a range of exemptions, deductions, and credits that lower the amount of tax they must pay at the end of the year.

Exemptions depend on your filing status:

Taxpayers have a choice between claiming the standard deduction for their filing status or itemizing non-business deductions.

If they choose the standard deduction:

• Single people and spouses filing separately can claim $2,300
• Married couples filing together can claim $4,600
• Heads of households can claim $,3,400

Itemized deductions followed the same rules as federal returns, with one exception: Taxpayers can’t deduct Mississippi state income taxes.

Finally, taxpayers can claim the following credits to reduce their income tax bill:

• Dependent care
• Long-term care
• Child adoption
• Charitable contributions
• Taxes paid to another state

To qualify for the last credit, taxpayers must file a return in the other state. They must then attach a copy of that paperwork and Form 80-160 to their Mississippi tax return.

See also: State Tax Reciprocity: Filing Your Taxes Made Easy

Filing and payment details for Mississippi

Taxpayers may file forms either by post or electronically via the TAP portal. However, e-filing is recommended by the Mississippi DOR for faster processing and refunds.

Individual income tax returns are due by April 15th in line with the federal filing date. Anyone can request an extension until October 15th for the paperwork, but all payments must be made on time.

If a taxpayer has less than 80% of their income taxes paid through withholding and owes over $200 in a tax year, they must also make estimated quarterly payments. These payments cover income from:

• Freelance work
• Side businesses
• Rental income
• Interest, dividends, and investments

The penalty for late payment is 0.5% on the amount owed plus interest.

What employers and workers should know about Mississippi income tax

As the employer, you’re responsible for withholding income taxes from your employees’ wages. Here are the requirements and other tips to bear in mind:

• Tax withholding: Collect Form 89-350 from each employee and use it to calculate withholdings. You should ask for a new copy of this form every year and within 30 days of a worker’s exemption status changing

• Tax returns: File Form 89-140 (Employer’s Withholding Tax Return) monthly, quarterly, or annually. You should confirm the filing schedule and frequency each year because they’re likely to change with payroll size

• Status checks: Track submitted payments and returns through the TAP dashboard. Consistent monitoring helps you catch issues with paperwork as soon as the system alerts you and keep employees updated

• Amends: Understand how to quickly change a return if a mistake is made. The process for Mississippi is relatively straightforward, as you just complete the form again and tick the ‘amended’ check box in the top right corner

• Extensions: If necessary, use Form 83-180 to apply for extensions on tax returns. Familiarizing your payroll team with the form means they can apply quickly and with no risk of errors

• Relocations: Regularly check employee records to ensure you have their current addresses and filing statuses. You can use a payroll platform with self-service features like Deel to make it easier for them to update their own records

• Mobile teams: Monitor how many days remote and traveling workers spend on Mississippi operations to ensure you calculate state-sourced income correctly. You can use time trackers to keep track of shifts and hours

• Continuous compliance: Review income tax rates annually to keep pace with Mississippi’s changing regulations. You should also look at exemptions, deductions, and credits to check you’re still applying these correctly

• Payroll automation: Consider using specialist US payroll software like Deel to automatically handle state withholding and reporting. Our software updates rules as regulations evolve to prevent errors and compliance issues

Simplify Mississippi tax compliance with Deel

Mississippi’s move toward zero income tax marks a major shift for employers and workers alike. Even as the situation settles over the next few years, annual rate changes and filing updates mean you still need to keep a close eye on tax compliance.

Deel Payroll - US can help you stay compliant as regulations evolve. Our powerful automation applies updates automatically, so all your calculations remain accurate. As you grow, Deel’s team of experts supports multi-state compliance so you keep your focus on the next steps.

Managing payroll in Mississippi? Book a call with the Deel team to understand how we can maintain compliance everywhere you hire, no matter how often the regulations change.