Chapters

00:00 Introduction to Mississippi's Tax Changes

00:49 Impact of Grocery Tax Reduction

02:05 Gasoline Tax Increase Explained

04:09 Calculating Net Savings for Households

05:10 Actionable Tips for Maximizing Savings

06:27 Conclusion and Future Topics

Transcript

Hi everyone, I'm Ryan Earley, host of the PERS Pro YouTube channel. While the Mississippi State income tax is going down as we went over in our last video, sales and excise taxes are also shifting. You are paying less for groceries and more for gas. So, are you better off in 2026? I'll provide an answer to that question and more. So let's get started.

On July 1st, 2025, Mississippi implemented a significant change to how we pay for our basic needs. House Bill 1 of the 2025 session officially reduced the state sales tax on groceries from 7 % down to 5%.

What counts as groceries? According to the Mississippi Department of Revenue, this 5 % rate applies to food or drink intended for human consumption that is eligible to be purchased with food stamps or SNAP. This includes your staples like meat, produce, dairy, and bread. However, it does not include prepared hot foods, alcohol, or non-food items like paper towels, which remain taxed at the full 7 % sales tax.

Let's look at the impact this reduction in grocery tax has on a household making $100,000. According to the most recent data from the U.S. Census Bureau and USDA, the average Mississippi household spends roughly $7,465 annually on groceries, or 12.6 % of the average household income in Mississippi. For a higher earning household making let's estimate an annual grocery spend of $10,000 on eligible items or roughly 10% of household income. This household's old tax at the 7 % rate would equate to $700 in grocery tax. Under the new tax at the lower 5 % rate, this results in a $500 grocery tax. The annual savings for this household is $200 per year.

To help fund infrastructure like roads and bridges, House Bill 1 of the 2025 session also included the first gasoline tax increase Mississippi has had since 1993 when rates hit for the first time according to the Federal Highway Administration. As of July 1st, 2025, we are currently at 21 cents per gallon, a three cent increase from where we were last year. This applies to gasoline and on-road diesel fuel. Looking ahead, the rate will hit 24 cents on July 1, 2026, and 27 cents in 2027. Starting in 2029, it will be adjusted for inflation every other year, though increases will be capped at one cent per year.

Let's estimate the additional gasoline and diesel tax for that same $100,000 income household that results from this gasoline and diesel tax increase. According to the most recent data from the Federal Highway Administration, the average driver in Mississippi drove 19,966 miles in 2022. Let's assume our household has two vehicles, each driving 20,000 miles a year at an average of 25 miles per gallon. This household will drive a total of 40,000 miles and consume 1,600 gallons of fuel a year. Under the old tax, 18 cents per gallon, this household would have paid $288 in fuel taxes. Under the new tax rate, 21 cents per gallon, this family now pays $336 annually. Their additional annual expense adds up to $48.

So, are you better off? If we combine our $100,000 income household examples, we have a grocery savings of $200, a gas tax increase of $48, resulting in a net savings of $152 per year. While $150 isn't a fortune, every bit does help.

Here are three action items PERS members can take to maximize these changes.

Check your receipts. Since the 5 % rate only applies to SNAP eligible items, check your receipts to make sure this is in fact the case. Mistakes can happen especially at smaller local establishments that don't have the big overhead to help behind the scenes. You can also buy raw ingredients to cook at home, saving you 2 % in grocery tax compared to hot deli items, ready to eat sandwiches and restaurant meals from the deli counter or bar.

Two, fuel efficiency matters. As the gas tax continues to climb higher, a higher MPG can effectively be a tax offsetting tool. Consolidating trips and maintaining proper air pressure in your tires reduces the gallons you buy, directly lowering your fuel tax burden without having to trade in your current vehicle.

Three, save or invest the savings. Don't let that $100 or $200 in annual savings vanish into lifestyle creep. As we discussed in previous video number 15, Financial Resolutions for PERS members, consider redirecting these small tax wins into your emergency fund or increasing your monthly contribution to deferred comp.

I hope this video helps you better understand and navigate the shift in grocery and gasoline taxes in 2026 and beyond. In our next video, we will discuss changes you can expect to your car and home property taxes in 2026. Please make sure you subscribe so you don't miss that video. If you found this video helpful, 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.