Taxes and retirement: A high concern
When making retirement plans, the majority of Americans consider healthcare, Social Security, and savings. However, there is one crucial element that can significantly reduce your retirement spending: taxes. States’ tax laws have the power to either reduce or increase your income, particularly if you are on a fixed income.
The fact that Mississippi is the most tax-friendly state for retirees in 2025 surprises everyone, even though states like California, Florida, and Texas are frequently at the forefront of retirement conversations due to their climate and lifestyle choices. Mississippi’s lead is shocking but unsurprising when the numbers and exemptions are examined closely.
What qualifies as a retiree tax-friendly state?
The financial magazine Kiplinger ranked states according to two major tax issues to identify which ones were the most retirement-tax-friendly. They started by searching for states that don’t tax retirement benefits such as 401(k) or Social Security payouts. Out of the entire nation, only 13 states satisfied the requirements.
The state with the lowest median property taxes emerged victorious among the 13 states. With its special set of tax exemptions for retirees, Mississippi is the winner and the most tax-friendly state for retiring on a tight budget.
Mississippi: The 2025 state with the lowest taxes for retirement
In 2025, Mississippi will have one of the strongest tax packages for retirees in the nation. Several forms of retirement income are exempt from state taxes. Among them are:
Benefits from Social Security
Military retirement pay, Traditional and Roth IRA distributions 401(k) and 403(b) plan distributions, Public and private pensions
Retirees can earn income from various sources without worrying about Mississippi taxing it, thanks to this broad exemption. Such tax freedom is a valuable and elusive commodity for the average person.
In addition to its retirement benefits, Mississippi offers low property taxes. The national average is much higher than the median property tax, which is just $1,189 annually. This arrangement is particularly practical for retirees who have already owned and paid for their properties and prefer to avoid large annual payments.
Future retirees will find it even more alluring because, while the state does impose a flat 4.4% income tax on income over $10,000, that rate will be halved to 4% in 2026.
Additionally, more of your wealth and property can be transferred to your family without incurring additional taxes because Mississippi does not collect estate tax or inheritance tax.
Senior tax break in Mississippi
Mississippi’s senior homestead exemption is one of the biggest victories for seniors. You may deduct or even exclude your property tax charge in full if you are a homeowner who is age 65 or older and resides in the house as your principal residence.
This is how it operates: Up to $7,500 of your home’s value is taken off the tax rolls thanks to the exemption. You will pay no property taxes at all if the value of your home is $75,000 or less.
To obtain it, you must submit an application to your local county tax assessor between January 1 and April 1. Once approved, you can continue to use the benefit as long as your qualifications remain unchanged.
Retirees who receive this type of tax break can save hundreds or even thousands of dollars annually, freeing up their income for other essentials like groceries, transportation, or medical bills.
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Mississippi’s retiree tax drawbacks
Mississippi is not entirely tax-free, even though it excels at property taxes and retirement income. The state may be less accommodating at sales tax. 7% is the standard rate, and it may be slightly higher in some cities or counties.
Furthermore, Mississippi is one of the grocery-taxing states. However, the grocery tax rate was lowered to 5% in July 2025 to help residents keep costs down.
However, there is one cost-cutting advantage for the state. Mississippi has one of the lowest petrol taxes in the nation, which can help retirees who continue to drive regularly save money on fuel.
Is Mississippi a suitable state for retirement?
Although the state’s tax policy is unquestionably in the best interests of retirees, it is best to consider other factors before making a decision. One component of the retirement equation is taxes.
With moderate housing, utilities, and necessities, Mississippi also boasts a low cost of living. This makes it a cost-effective option for anyone looking to extend their retirement savings.
Most retirees also benefit from the climate. Winters are typically mild, which lowers heating expenses and makes it possible to enjoy the outdoors all year round. However, the hot and muggy summers will negatively impact some people. Due to its location on the Gulf Coast, residents must factor in insurance costs and weather preparedness because the state is vulnerable to natural disasters like hurricanes and tornadoes.
Healthcare is one area where Mississippi lags. According to national reports, the state performs poorly when compared to other states in terms of hospital quality, health indicators, and access to care. These circumstances can be difficult, particularly for older people with long-term health conditions.
Others may also consider political climate and cultural preferences when determining whether Mississippi would be a suitable place to call home. As with any life decision, tax benefits must be weighed against personal priorities, family ties, and lifestyle needs.
The following:
Selecting the ideal retirement state
Due to its extensive income tax exemptions, low property tax burden, and absence of estate or inheritance taxes, Mississippi is the most tax-friendly state for retirees in 2025. Mississippi might be the best place for you to save and grow your nest egg if taxes are your worst retirement nightmare.
Tax-friendly states aren’t always the greatest places to live, though. Before choosing, you should consider other aspects such as community resources, climate, safety, and healthcare quality.
Whether you choose to do it now or in the future, doing your research presently will allow you to evaluate the options and determine which state is best for your retirement—not just on paper, but in practice.
