Mississippi Military Retired Pay and Service Income Exemptions

Mississippi is one of the states where the military retirement answer is simply yes, with no age test, no dollar cap, and no phase-in. Retirement income, pensions, and annuities are not subject to Mississippi income tax where the recipient has met the retirement plan requirements, and military retired pay falls inside that. Survivor Benefit Plan, Reserve Component SBP, and Retired Serviceman's Family Protection Plan annuities are likewise untaxed. The rest of the list is short and worth having in one place. Mississippi does not tax Social Security benefits, Railroad Retirement, public welfare assistance, Department of Veterans Affairs payments, or workers' compensation, and where federal law taxes part of such income, Mississippi still does not. Military disability retirement pay and VA disability compensation are not taxed. Dependency and Indemnity Compensation is not taxed. Two exclusions apply to people still serving. Pay received as additional compensation for hazardous duty in a combat zone designated by the President is exempt. And the first $15,000 of salary received by a member of the National Guard or reserve forces is excluded, covering inactive duty training such as monthly drills and meetings, active duty training such as summer camps, schools, and cruises, and state active duty such as emergency duty. Early distributions are not retirement income for this purpose and may be taxed. That is the one place a retiree can get this wrong. Now the context that changes how much any of this is worth. Mississippi currently exempts the first $10,000 of taxable income and taxes the remainder at 4.4 percent. HB 1 of the 2025 regular session steps that rate down: 3.75 percent for calendar year 2027, 3.5 percent for 2028, 3.25 percent for 2029, and 3 percent for 2030 and after, with a formula that cuts it further from 2031 when the Working Cash-Stabilization Reserve Fund is fully funded and revenue collections exceed appropriations by set margins. The state is steering toward eliminating the individual income tax. The practical reading: the exemption for military retired pay is real and complete today, and its comparative value against other states shrinks as the general rate falls, because Mississippi's non-veteran neighbors in the tax code are catching up to where retirees already sit. Ordinary military pay is another matter. Military pay is taxable to the state that is your home of record, and if you entered the military in Mississippi you are presumed to be a Mississippi resident until you change that designation. That presumption is the most common surprise for a Mississippi-enlisted servicemember who has not lived in the state for years. For spouses: a nonresident spouse with Mississippi wages must file a nonresident return and pay Mississippi tax on Mississippi-earned income unless the spouse qualifies under the Military Spouses Residency Relief Act. Note the interaction with the homestead exemption, where claiming residency in another jurisdiction can disqualify the household.