TAX BURDEN FOR MISSISSIPPI RETIREES

Posted: April 1, 2010 in TAX BURDEN FOR MISSISSIPPI RETIREES

Many people planning to retire use the presence or absence of a state income tax as a litmus test for a retirement destination. This is a serious miscalculation since higher sales and property taxes can more than offset the lack of a state income tax. The lack of a state income tax doesn’t necessarily ensure a low total tax burden. Following are the taxes you can expect to pay if you retire in Mississippi:

State Sales Tax: 7% (prescription drugs, residential utilities, motor fuel, newspapers, healthcare services, and payments made by Medicare and Medicaid are exempt); County and city taxes may add an additional 3% to the state rate.
Gasoline Tax: 27.2 cents/gallon
Diesel Fuel Tax: 27.2 cents/gallon
Cigarette Tax: $`.56 cents/pack of 20
Personal Income Taxes
Tax Rate Range: Low – 3%; High – 5%.
Income Brackets: 3 (Lowest – $5,000; Highest – $10,000). The tax brackets reported are for single taxpayers. For married taxpayers filing jointly, the same rates apply to income brackets ranging from $31,860 to $126,580 (2008).
Personal Exemptions: Single – Single – $6,000; Married – $12,000; Dependents – $1,500. For details refer to http://www.mstc.state.ms.us/taxareas/individ/whoshouldfile.htm.
Additional Exemption: 65 or older – $1,500
Standard Deduction: Single – $2,300; Married filing jointly – $4,600
Medical/Dental Deduction: Partial
Federal Income Tax Deduction: None.
Retirement Income Taxes: 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.
Retired Military Pay: Retired pay is exempt after January 1, 1994. The exemption is also available to the spouse or other beneficiary upon the death of the primary retiree. Widows’ pensions received from the VA are not taxable.
Military Disability Retired Pay: Retirees who entered the military before Sept. 24, 1975, and members receiving disability retirements based on combat injuries or who could receive disability payments from the VA are covered by laws giving disability broad exemption from federal income tax. Most military retired pay based on service-related disabilities also is free from federal income tax, but there is no guarantee of total protection.
VA Disability Dependency and Indemnity Compensation: VA benefits are not taxable because they generally are for disabilities and are not subject to federal or state taxes.
Military SBP/SSBP/RCSBP/RSFPP: Generally subject to state taxes for those states with income tax. Check with state department of revenue office.

Property Taxes
Property and automobiles are both subject to ad valorem taxes – meaning that the tax is assessed in relationship to the value of the property. Single family residential property is taxed at 10% of its assessed value. All other personal property is assessed at 15% of its value. Motor vehicles are taxed at 30% of their value. The state offers a homestead exemption to all eligible taxpayers. Eligible homeowners should make application with the Tax Assessor in the county where the home is located. This application must be filed between January 1 and April 1. The maximum exemption for regular homeowners is $300. For homeowners 65 years of age or totally disabled, there is an exemption on the first $75,000 true value. You do not have to apply for homestead exemption each year. You should reapply if there were changes in your homestead status (marital, property, ownership, etc.).
For additional information, call 601-923-7631 or refer to http://www.mstc.state.ms.us/taxareas/property/advalor.html.

Inheritance and Estate Taxes – There is no inheritance tax. An estate tax is imposed on the value of a decedent’s estate when the total gross estate exceeds the federal exemption of $1,000,000. The exemption amount will follow the federal exclusion under 26 USC 2010.

For further information, visit the Mississippi State Tax Commission site http://www.mstc.state.ms.us or call 601-923-7000 [Source: http://www.retirementliving.com Mar 2010]

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