Mississippi does not have an inheritance tax or a state estate tax

Mississippi is one of the states that does not tax inheritances or estates at the state level. If you inherit money, property, or other assets from someone who died, you will not owe Mississippi state tax on that inheritance. This applies whether the person who died lived in Mississippi or owned property there.

The only tax that may apply to an estate is the federal estate tax, which is a tax on the total value of everything a person owned when they died. This is separate from state taxes. Federal estate tax only applies if the estate is large enough to meet the federal threshold, which changes each year and is currently quite high — most estates do not owe it.

Key Takeaways

  • Mississippi has no state inheritance tax, so heirs pay nothing to the state on what they receive.
  • Mississippi has no state estate tax, so the estate itself does not owe Mississippi tax before assets are distributed.
  • Federal estate tax may still apply if the total estate value exceeds the federal threshold, but this affects only very large estates.
  • Inherited income — such as interest or rent from inherited property — is taxable as regular income in the year it is earned.
  • Mississippi residents who inherit from out-of-state estates should check whether the deceased person's home state had an inheritance or estate tax.

What the federal estate tax covers and who pays it

The federal estate tax is a tax on the total value of an estate — the money, property, investments, and other assets a person owned at death. It is paid by the estate itself, not by individual heirs. The executor or administrator of the estate is responsible for filing the federal return and paying any tax owed before distributing assets to heirs.

The federal threshold changes each year. In 2024, federal estate tax applies only to estates worth more than $13.61 million. This threshold is high enough that the vast majority of estates — including most middle-class and upper-middle-class estates — do not owe federal tax. If an estate is below the threshold, no federal estate tax return is required.

After 2025, the federal threshold is scheduled to drop significantly unless Congress changes the law. This is important to know if you are planning an estate or managing one for someone else, because the rules may be different by the time the estate is settled.

Income tax on inherited assets and ongoing earnings

Inheriting an asset is not a taxable event in Mississippi or at the federal level. You do not owe tax simply because you received the inheritance. However, if the inherited asset produces income — such as interest, dividends, rent, or capital gains — that income is taxable in the year you receive it.

For example, if you inherit a house and rent it out, the rent you collect is taxable income. If you inherit a savings account and earn interest on it, that interest is taxable. If you inherit stock and sell it for a profit, the gain is taxable. These are all treated as your regular income and reported on your Mississippi and federal tax returns.

The original cost basis of inherited assets is "stepped up" to the fair market value on the date of death. This means if you inherit stock worth $10,000 that the deceased person bought for $2,000, your cost basis is $10,000. If you sell it immediately for $10,000, you owe no capital gains tax. This step-up in basis is a federal rule that benefits heirs.

When you might owe tax to another state

If the person who died lived in a state other than Mississippi, or owned property in another state, that state's tax rules may apply to the estate. Some states have inheritance taxes or estate taxes, and some have both. The tax owed depends on where the deceased person lived and where their property was located, not where you live as the heir.

For example, if your parent died in Iowa, which has an inheritance tax, you may owe Iowa tax on your inheritance even if you live in Mississippi. Similarly, if someone died in New Jersey and owned real estate there, New Jersey estate tax may apply to that property. You should ask the executor or estate attorney whether the deceased person's home state or any state where they owned property had an inheritance or estate tax.

How to learn about federal estate tax applies

The executor or administrator of an estate should determine whether federal estate tax is owed. If the estate is clearly below the federal threshold — for example, if the total value is less than $5 million — no federal return is required. If the value is close to or above the threshold, the executor should consult a tax professional or estate attorney to determine whether a federal return must be filed.

The federal estate tax return is Form 706, filed with the IRS. It is due nine months after the date of death, though an extension can be requested. Even if no tax is owed, a return may be required if the estate exceeds the threshold, because filing preserves certain tax benefits for heirs.

If you are the executor or beneficiary and are unsure whether an estate owes federal tax, contact a CPA, tax attorney, or the IRS directly. The IRS can answer questions about whether a return is required based on the estate's value and composition.

Frequently Asked Questions

Do I have to pay Mississippi tax on money I inherited?

No. Mississippi has no inheritance tax or estate tax. You will not owe Mississippi state tax on the inheritance itself. However, if the inherited money earns interest or you use it to generate income, that income is taxable.

What if the person who died owed taxes?

The estate pays any taxes owed by the deceased person before distributing assets to heirs. This includes federal and state income taxes for the year of death, and any prior years' taxes. The executor handles this. Heirs are not personally liable for the deceased person's taxes unless they were co-owners of the asset or co-signers on a debt.

Do I need to report the inheritance on my tax return?

You do not report the inheritance itself as income. However, if the inherited asset produces income — interest, dividends, rent, or capital gains — you report that income on your tax return in the year you receive it. The executor may provide you with a Form 1099 or other document showing income earned by the estate.

What if I inherit property and want to sell it?

When you sell inherited property, you may owe capital gains tax on the difference between the sale price and the fair market value on the date of death (your stepped-up basis). If you sell it for the same amount it was worth when you inherited it, you owe no capital gains tax. If you sell it for more, you owe tax on the gain.

Is there a deadline to settle an estate in Mississippi?

Mississippi law does not set a specific deadline for settling an estate, but the executor should work reasonably quickly. Federal estate tax returns, if required, are due nine months after death. State income tax returns for the deceased person are due by the normal deadline. The executor should consult an attorney about the timeline for their specific situation.