Chapters

00:00 Mississippi's Tax Transformation

05:13 Strategic Financial Moves for Tax Savings

Transcript

Hi everyone, I'm Ryan Earley, host of the PERS Pro YouTube channel. Many are aware Mississippi is aiming for a 0% state income tax rate. But where do we stand today, and how long will take to get to 0%? What strategic moves can you make to take advantage of the dropping rates? I'll provide answers to those questions and more, so let's dive in.

Mississippi is currently in the middle of a historic multi-year tax cut. The goal? To eventually eliminate the individual income tax entirely. The state has systematically eliminated lower tax brackets over the last few years. Here is a table showing the rate from 2024 through 2030.

As you can see, as of January 1, 2026, the tax rate on all taxable income exceeding $10,000 has dropped to a flat 4%. For a household making $100,000, this 0.4% drop from 2025 to 2026 represents a direct saving of several hundred dollars.

The state's long-term goal remains a 0% triggered as state reserve fund targets are met. Optimistically and mathematically, as the law is written today, 0% could be achieved as early as 2040.

One of the most common questions from retirees or those looking to retire is, do I have to pay state income taxes on my retirement income? That answer depends on how we define retirement income and its source

PERS. The good news is that PERS pension income is not subject to Mississippi state income tax. In fact, Mississippi is one of the most retiree-friendly states because it exempts all qualified retirement income from state level taxation.

Social Security. Additionally, Mississippi does not tax Social Security benefits. It falls under the qualified retirement income exemption above. Earned Income PERS retirees that still work either part-time or full-time outside of a PERS job while drawing retirement benefits still must pay state income taxes on the portion that is earned income. The qualified retirement benefits, such as PERS, would still be exempt from state income taxes while that PERS retiree is working. Important note, while qualified retirement income is exempt, early distributions or early withdrawals, that is taking money out before you meet age or service requirements, are not exempt. These early withdrawals are generally subject to Mississippi State income tax and may also be subject to additional income tax penalties.

Because the state tax rate is trending downward every year, we have a unique opportunity for what I call income and deduction arbitrage. If you have the flexibility to shift when you receive income or when you take deductions, you can save money on state income taxes. Strategic Moves for PERS Members

457b Deferred Comp- If you contribute to the Mississippi Deferred Compensation Plan, you receive a state income tax deduction. By contributing more now, while the rate is 4%, your deduction is worth more than it will be when the tax rate eventually drops to 3 % or 0%.

Mississippi Affordable College Savings or MACS 529. Contributions to a 529 plan allow for a state income tax deduction of up to $10,000 for single filers or $20,000 for joint filers per year in Mississippi. By contributing more now while the rate is 4%, your deduction is worth more than it will be in the future.

Timing of income. If you are considering a large one-time withdrawal that would otherwise be a taxable event, waiting until 2027 or later could result in a lower state income tax bill as the state rate continues its march toward zero.

Tax rates in Mississippi are moving towards 0% and that has created financial planning opportunities. Here are your action items you can take now.

One, adjust your state withholding. With the rate drop to 4%, you may be over withholding. Check your pay stub and consider updating your Mississippi withholding exemption certificate if needed to keep more of your paycheck now to help with cash flow management throughout the year.

Two, evaluate your 457 and 529 and other pre-tax contributions. If you have the ability, consider increasing your contributions now and decreasing them later to maximize the value of the deduction while state tax rates are still at 4%.

I hope this video helps you minimize your state income taxes for 2026. In our next video, we will discuss the recent changes to the gasoline and grocery tax here in Mississippi. Please make sure you subscribe so you don't miss that video. If you found this video helpful, you can thank me by hitting the thumbs up button and sharing it with other PERS members. If you have a follow-up question about PERS or anything else related to personal finance, please visit our website at perspro.ms and submit your question or topic for a future episode. Thank you for your valuable public service to the state of Mississippi. We'll see you next time.

Disclaimer. This video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified professional for personal advice specific to your situation.