Mississippi has no state estate tax and no state inheritance tax

Mississippi does not impose an estate tax on property passed to heirs, and it does not tax inheritances received by beneficiaries. If you live in Mississippi or own property there, you will not owe Mississippi state tax on either the estate itself or what you inherit.

The federal government does impose an estate tax, but only on estates above a certain value. For 2024, that threshold is $13.61 million per person. Most Mississippi residents and their heirs will not reach that amount, which means most Mississippi estates pay no federal estate tax at all.

This is different from income tax. Heirs may owe federal income tax on certain types of inherited property — such as retirement accounts or investment income — but that is income tax, not estate or inheritance tax. Mississippi also has no state income tax, so heirs do not owe state income tax on those items either.

Key Takeaways

  • Mississippi does not tax estates or inheritances at the state level, regardless of the size of the estate or what you inherit.
  • The federal estate tax applies only to estates worth more than $13.61 million in 2024, and that threshold changes each year.
  • Heirs may owe federal income tax on inherited retirement accounts, investment earnings, or other income-producing property, but this is separate from estate tax.
  • Because Mississippi has no state income tax, heirs do not owe state tax on inherited income or property.
  • The federal threshold is scheduled to drop to approximately $7 million per person in 2026 unless Congress changes the law.

How the federal estate tax threshold works

The federal estate tax applies to the total value of everything a person owns when they die — real estate, bank accounts, investments, vehicles, business interests, and personal property. The executor or personal representative adds up the fair market value of all these assets.

If the total is below the threshold, no federal estate tax is owed. If it exceeds the threshold, the estate pays federal tax only on the amount above that line. For example, if an estate is worth $14 million in 2024, only the $390,000 above the $13.61 million threshold is subject to federal estate tax.

The threshold changes every year based on inflation. It was $12.92 million in 2023 and $13.61 million in 2024. Congress set these thresholds to expire at the end of 2025, which means the threshold will drop to approximately $7 million per person starting in 2026 unless lawmakers pass new legislation.

What types of property are subject to federal estate tax

The federal estate tax applies to nearly all property you own at death, including:

  • Real estate (land, houses, rental property)
  • Bank accounts and cash
  • Stocks, bonds, and mutual funds
  • Retirement accounts (IRAs, 401(k)s, pensions)
  • Life insurance proceeds if you own the policy
  • Business interests and partnerships
  • Vehicles, jewelry, art, and other personal property
  • Property held in trusts

Some property is excluded or reduced. For example, property left to a surviving spouse is usually not taxed (the marital deduction). Charitable donations are also deductible. Life insurance proceeds are included in the estate value, but only if you owned the policy at death — if someone else owned it, the proceeds go to them tax-free.

The difference between estate tax and inheritance tax

Estate tax and inheritance tax are not the same thing, though the terms are sometimes used interchangeably. Estate tax is paid by the estate itself before money is distributed to heirs. Inheritance tax is paid by the person who receives the inheritance.

The federal government uses an estate tax system. Mississippi uses neither. Some states use inheritance tax (the heir pays), some use estate tax (the estate pays), and some use both. Mississippi uses neither system.

Six states currently have an inheritance tax: Iowa, Kentucky, Maryland, Nebraska, New Jersey, and Pennsylvania. Twelve states have an estate tax. If you inherit property from someone who lived in or owned property in one of those states, you may owe tax to that state, even if you live in Mississippi.

Income tax on inherited property is separate from estate tax

Heirs do not usually owe income tax on the inheritance itself. However, they may owe income tax on money the inherited property generates after they receive it.

For example, if you inherit a house, you do not owe income tax on the house. But if you rent it out and collect rent, you owe income tax on that rental income. If you inherit a savings account, you do not owe income tax on the account balance, but you owe income tax on any interest it earns after you inherit it.

Inherited retirement accounts (IRAs, 401(k)s) are more complex. The rules depend on whether you are the spouse, a minor child, a non-spouse beneficiary, or a non-designated beneficiary. Some inherited retirement accounts must be withdrawn within a set time, and those withdrawals are taxed as income. Mississippi has no state income tax, so you will not owe Mississippi state income tax on these withdrawals, but you will owe federal income tax.

What happens if an estate exceeds the federal threshold

If an estate is large enough to owe federal estate tax, the executor or personal representative must file Form 706 (United States Estate Tax Return) with the IRS. This form is due nine months after the date of death, though an extension can be requested.

The executor calculates the total estate value, subtracts deductions (such as the marital deduction or charitable gifts), and pays the tax owed. The tax rate on the taxable amount is 40 percent. After the tax is paid, the remaining estate is distributed to heirs according to the will or state law.

Most Mississippi residents will never need to file Form 706 because their estates will not exceed the threshold. However, if you own significant property, a business, or life insurance, it is worth reviewing your estate value with an attorney or tax professional to understand whether your heirs might face federal estate tax.

Planning strategies for larger estates

If your estate is close to or above the federal threshold, there are legal strategies to reduce the amount subject to federal estate tax. These include:

  • Gifting during life: You can give up to a certain amount per year to each person without using any of your lifetime exemption. In 2024, that amount is $18,000 per recipient per year.
  • Trusts: Certain types of trusts (such as irrevocable life insurance trusts or charitable remainder trusts) can remove property from your taxable estate.
  • Marital deduction: Property left to a surviving spouse is not taxed, which can defer or eliminate estate tax for the surviving spouse's lifetime.
  • Charitable donations: Gifts to may have access to charities reduce the taxable estate dollar-for-dollar.
  • Life insurance ownership: If someone other than you owns your life insurance policy, the proceeds are not included in your taxable estate.

These strategies require careful planning and legal documentation. If you think your estate might be subject to federal tax, consult with an estate planning attorney or tax professional in Mississippi who can review your specific situation.

Frequently Asked Questions

Do I owe Mississippi state tax on an inheritance?

No. Mississippi has no state inheritance tax or state estate tax. You will not owe Mississippi tax on property you inherit or on the estate itself. However, you may owe federal income tax on income generated by inherited property after you receive it, such as rental income or interest.

What if I inherit property located in another state?

If the property is located in a state with an inheritance or estate tax, that state may tax the inheritance or the estate. The tax depends on the state's rules and whether the person who died lived there or owned property there. You should contact the tax authority in that state or consult a tax professional.

Is life insurance included in the federal estate tax calculation?

Yes, if you own the life insurance policy. The death benefit is included in your taxable estate. However, if someone else owns the policy (such as a trust or another person), the proceeds are not included in your estate and go directly to the beneficiary tax-free.

Will the federal estate tax threshold change in 2026?

The current threshold is scheduled to drop to approximately $7 million per person in 2026 unless Congress passes new legislation. This means more estates may be subject to federal tax starting that year. If you have a large estate, it is worth reviewing your plan before 2026.

Do I need to file a federal estate tax return if my estate is below the threshold?

Generally, no. However, if your estate is close to the threshold or if you made large gifts during your lifetime, you may need to file Form 706 even if no tax is owed. An executor or tax professional can determine whether a return is required in your situation.