1031 Exchange in Mississippi

By Skyline Capital Investments · Updated October 26, 2026 · 7 min read

Does Mississippi recognize 1031 exchanges?

Yes. A Mississippi 1031 exchange defers state income tax under Miss. Code 27-7-9(f)(1)(A), which says no gain or loss is recognized when property held for productive use in a business or for investment is exchanged for like-kind property, where no gain or loss is recognized under Section 1031 of the Internal Revenue Code. The statute excludes stock in trade, property held mainly for sale and securities, as federal law does.

The state tax being deferred is modest. Mississippi taxes gains as income at a flat 4% above the first $10,000 for 2026, falling to 3% by 2030, so the state share on a $1 million gain is about $40,000 in 2026. The federal tax on the same gain is several times larger, which is why most Mississippi owners look at an exchange in the first place.

Federal 1031 rules that apply in Mississippi

The deadlines are federal, and Mississippi adds none. Day 45 after your closing is the last day to name replacement properties in writing, and day 180, or your return due date if that comes first, is the last day to close. The relinquished and replacement properties both have to be real estate held for business or investment, and the sale money has to sit with a qualified intermediary, out of your reach, the whole time.

Full deferral takes two things: a replacement priced at or above the net sale price, and every dollar of net cash going into it. Anything you pocket, and any loan balance you pay off without taking on equal new debt or adding cash, counts as boot, which the IRS and Mississippi both tax. The identification tests and boot math are laid out in our guide to 1031 exchange rules, and our complete 1031 exchange guide follows a deal from listing to the replacement closing.

Mississippi withholding at closing and how an exchange affects it

Mississippi’s nonresident withholding rule, Miss. Code 27-7-308, applies to a sale of real property “which is not considered an exchange or trade of such property,” where the property is owned by a nonresident and the buyer pays gross proceeds of more than $100,000. In those sales, the seller must withhold from the proceeds and pay the Department of Revenue 5% of the amount realized, or the applicable percentage of the recognized gain if the seller files an affidavit stating it. The statute does not name a separate rate for the gain, so the figures below assume the same 5%.

A like-kind exchange is an exchange, so the statute’s own wording leaves it outside the rule. The text does not address the cash a seller takes at closing in a partial exchange. If you plan to take boot, ask your CPA whether to pay 5% of the gain on that boot from the proceeds, or to treat the whole transaction as an exchange, and keep a record of the reasoning.

The duty falls on the seller, not the buyer or the closing agent. The statute says licensed professionals and closing agents owe no duty under it and are not liable for anyone else’s obligation, so do not assume the closing attorney will handle it.

• A corporation registered to do business in Mississippi is treated as a resident.
• Sales with gross proceeds of $100,000 or less are outside the rule.
• A seller who paid on the full amount realized can claim a refund of the excess with an affidavit of the recognized gain.

Does Mississippi have a 1031 clawback?

No. Mississippi does not require a yearly tracking form when you exchange Mississippi property for property in another state, and it has no rule that reaches back to tax the deferred Mississippi gain when the replacement is later sold. Only four states have rules of that kind: California, Massachusetts, Montana and Oregon.

So an owner can trade a building in Gulfport or Southaven for one in Tennessee, Texas or Florida, none of which has an individual income tax on that gain, and file nothing extra with Mississippi in later years. If you still live in Mississippi when you sell the replacement in a taxable sale, the gain is reported on your Mississippi return then.

Does Mississippi regulate qualified intermediaries?

No. Mississippi is not one of the nine states with a law regulating exchange facilitators, which are California, Colorado, Connecticut, Idaho, Maine, Nevada, Oregon, Virginia and Washington. No Mississippi bond, license or account rule protects the money an intermediary holds for you.

So the vetting is up to you. Get the intermediary’s fidelity bond and errors and omissions policy in writing, and read the limits. Find out whether your money goes into its own account under your name or into a pooled account, whether two signatures are needed for any withdrawal, and how often you will see a statement. If your replacement will be across the line in Tennessee, ask how many cross-state exchanges it closes in a year. Our guide to choosing a 1031 qualified intermediary covers fees and contract terms.

Federal rules bar your agent from the past two years, such as your attorney, accountant, employee or real estate broker, from serving as your intermediary.

Common 1031 exchange paths for Mississippi owners

Mississippi exchanges tend to follow four paths, and none of them adds a later Mississippi filing beyond your regular return.

Mississippi to Mississippi is the simplest: an owner trades two smaller Hattiesburg buildings for one larger property in Madison or Rankin County. For a resident seller, the withholding rule does not apply.

DeSoto County to the Memphis area is a common cross-border move. The suburbs of Southaven, Olive Branch and Horn Lake sit next to Memphis, and owners often trade across the line into Shelby County, Tennessee, or the other way.

Mississippi to Texas or Florida suits owners who want larger markets. Mississippi has no clawback, so the move is clean on the state side.

Another state into Mississippi brings buyers who like Mississippi’s quick eviction process and flat income tax. Watch the property tax: rental real estate is assessed at 15% of true value, and county millage averages about 118 mills.

Run that number before you identify a Mississippi replacement. A $2,000,000 building assessed at 15% has $300,000 of assessed value, and at the statewide average of 118.42 mills the yearly bill is about $35,526, or 1.78% of value. In Madison County at 94.13 mills it would be about $28,239 before city millage, and in Quitman County at 171.83 mills about $51,549. Mississippi revalues real property at least every four years, so price in the bill at your purchase price, not the seller’s current bill. Our page on the property tax rate in Mississippi has the county table.

Worked example: a DeSoto County exchange

An owner living in Memphis sells a 20-unit building in Southaven for $2,000,000. After $100,000 of selling costs and with an adjusted basis of $750,000, the gain is $1,150,000. The $900,000 loan is paid off, and the remaining $1,000,000 goes to the qualified intermediary.

The owner buys a $2,100,000 building in Germantown, Tennessee, with the $1,000,000 of exchange funds and a new $1,100,000 loan. All the gain is deferred. Mississippi tax deferred at the 2026 rate of 4% is $46,000, and because the sale is an exchange, the 5% nonresident rule does not apply.

Compare a straight sale by the same Memphis owner. The owner would pay the Department 5% of the amount realized, or $95,000 on $1,900,000, or $57,500 with an affidavit if 5% is applied to the gain, and later file for a refund of the amount above the actual tax.

Now a partial exchange. If the owner took $100,000 in cash at closing and sent $900,000 to the intermediary, $100,000 of gain would be recognized. The Mississippi tax on it would be about $4,000 at 4%, and $1,050,000 of gain, about $42,000 of Mississippi tax, would stay deferred.

Timeline tips for a Mississippi exchange

Line up the replacement search before you list. The 45-day clock starts at closing, and owners exchanging into Tennessee or Texas often need to see buildings in a new market inside that window.

• Sign the exchange agreement and assign the sale contract before closing, not at the table.
• If you are a nonresident, have your CPA confirm in writing how any boot will be handled under 27-7-308.
• If you sell late in the year, file an extension so your return due date does not cut the 180 days short.
• Keep the exchange records with the replacement property, since your Mississippi basis carries over to it.
• If you are buying the replacement in Mississippi, ask the county assessor when the next reappraisal is due, so your projections include the tax bill at your purchase price.

Selling a Mississippi apartment building as part of an exchange

Skyline buys apartment buildings with five or more units in Mississippi. We buy directly, close on your timeline, and can work inside 1031 deadlines. We work with your intermediary on the contract assignment and can set a closing date that gives you room to find a replacement before your 45 days start.

For the tax you would owe without an exchange, see Mississippi capital gains tax on real estate. The 1031 exchange calculator runs the federal side for your own numbers.