Mississippi Capital Gains Tax on Real Estate

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

Does Mississippi have a capital gains tax?

Mississippi capital gains tax on real estate is the state individual income tax. The Department of Revenue treats long-term capital gains as taxable income, with no lower rate and no exclusion for investment real estate, so the gain on an apartment building is taxed like wages.

For 2026, Mississippi taxes the first $10,000 of taxable income at 0% and everything above it at 4%. On a large sale, the effective state rate on the gain is a flat 4%, and every dollar of gain above the first $10,000 of income pays the same rate.

Mississippi income tax rates for 2026 and later

The 4.4% rate for 2025 and the 4% rate for 2026 come from earlier law. House Bill 1 of 2025, the Build Up Mississippi Act, added the yearly step-down from 2027 in the rate on taxable income above $10,000. The schedule below is from the Department of Revenue’s rate table and its summary of HB 1.

• The same schedule applies to single and joint filers.
• From 2031, the rate can fall below 3% by 0.2 to 0.3 percentage points a year if the state’s reserve fund is full and general fund revenue beats appropriations by set margins.
• The phase-down gives sellers a reason to think about timing. The same $1,000,000 gain is taxed at $40,000 in 2026, $37,500 in 2027 and $30,000 in 2030.

How Mississippi and federal capital gains tax stack

The federal and Mississippi taxes are separate and add together. Federal long-term gain is taxed at 0%, 15% or 20%, and Revenue Procedure 2025-32 puts the start of the 20% bracket for 2026 at $613,700 of taxable income on a joint return and $545,500 for a single filer.

The part of your gain equal to depreciation you claimed is unrecaptured Section 1250 gain, taxed federally at up to 25%. The 3.8% net investment income tax applies once modified adjusted gross income passes $250,000 joint or $200,000 single. Mississippi has no investment income surtax.

On a typical apartment sale, then, the federal tax is roughly six times the Mississippi tax. Deferring the federal tax is the main reason Mississippi owners use a 1031 exchange, and the falling state rate is a reason some wait to sell.

Mississippi withholding when a nonresident sells

Mississippi requires 5% withholding on sales of real property owned by a nonresident, under Miss. Code 27-7-308, and the duty sits with the seller. In a sale that is not an exchange or trade, with gross proceeds over $100,000 paid by the buyer, the seller must withhold from the sale proceeds and pay the Department of Revenue 5% of the amount realized on the sale. If that exceeds the net proceeds payable to the seller, only the net proceeds are due.

Most states put this on the buyer. Mississippi’s statute says licensed professionals and closing agents owe no duty to anyone under it and are not liable for another party’s obligation, and a seller who does not pay is personally liable to the Department, though title to the property is not affected. In practice, a nonresident seller should plan to have the payment made from the closing proceeds.

Plan the paperwork before closing. Ask your CPA for the recognized gain figure a few weeks ahead, so the affidavit is signed and the lower payment can be made from the proceeds on closing day. If the property is held in an LLC, confirm with your CPA how the entity is treated for this rule, since the statute names only corporations registered in Mississippi as residents.

• A corporation registered to do business in Mississippi is treated as a resident and is not subject to the rule.
• Sales with gross proceeds of $100,000 or less are outside it.
• If 5% of the amount realized would overpay the tax on the gain, the seller can file an affidavit under penalty of perjury stating the recognized gain and pay the applicable percentage of that gain instead. The statute does not spell out a separate rate, so this page assumes the same 5%; confirm it with your CPA or the Department.
• A seller who paid on the full amount can later claim a refund of the excess with the same kind of affidavit.
• The seller also sends the Department the IRS real estate information returns for the sale.

Timing a Mississippi sale around the rate cuts

Because the rate falls every January through 2030, the year a gain is recognized changes the Mississippi tax. On the $1,150,000 gain in the example below, closing in January 2027 instead of December 2026 cuts the state tax from $46,000 to $43,125, a saving of $2,875. That is real money, but it is small next to the federal bill, and a buyer, a lender or a market shift can easily cost more than a quarter-point of state tax.

Seller financing is the other way to use the schedule. In an installment sale, gain is generally recognized as principal is collected, so principal received in later years would be taxed at the lower rate for those years. If half of the example gain were recognized in 2026 at 4% and half in 2027 at 3.75%, the Mississippi tax would be about $44,563, roughly $1,438 less than taking it all in 2026. The federal effect of spreading the gain, which can keep more of it out of the 20% bracket and the NIIT, is usually the larger reason to consider it.

Depreciation recapture in Mississippi

Mississippi has no separate recapture rate. The part of your gain that comes from depreciation is income taxed at the same flat 4% for 2026 as the rest of the gain. That is a simpler picture than the federal one, where the depreciation portion is taxed at up to 25% and the rest at 15% or 20%.

Mississippi computes gain by reducing basis for the depreciation allowed, under Miss. Code 27-7-9(e), so your Mississippi gain on a building held for years is usually close to the federal figure. If you used a cost segregation study or bonus depreciation, have your CPA confirm the Mississippi basis before you sign, since state and federal depreciation can differ.

Worked example: selling a $2M apartment building in Mississippi

A married couple living in Madison sells a 24-unit building in Jackson for $2,000,000 and pays $100,000 in selling costs. They bought it for $1,100,000 and have claimed $350,000 of straight-line depreciation, so their adjusted basis is $750,000 and their gain is $1,150,000: $350,000 of unrecaptured Section 1250 gain and $800,000 of long-term capital gain. They have $250,000 of other taxable income, and the building carries a $900,000 loan.

Federal tax: $87,500 on the Section 1250 gain at 25%, $2,055 on $13,700 at 15%, $157,260 on $786,300 at 20%, and $43,700 of net investment income tax, for $290,515.

Mississippi tax: their other income already uses up the $10,000 taxed at 0%, so the whole $1,150,000 gain is taxed at 4%, or $46,000.

Combined tax is $336,515, about 29% of the gain. After paying off the loan, the couple nets $1,000,000 before tax and about $663,485 after. If the same sale closed in 2027 at 3.75%, the Mississippi tax would be $43,125; in 2030 at 3%, $34,500.

The same sale by a nonresident seller

Now suppose the couple lives in Memphis and owns the building in their own names. The building is owned by nonresidents and the gross proceeds are well over $100,000, so they must pay the Department 5% of the amount realized. Treating the amount realized as the price less the $100,000 of selling costs, or $1,900,000, the payment is $95,000.

With an affidavit stating their $1,150,000 recognized gain, and assuming the same 5% applies to the gain, the payment drops to $57,500. Their actual Mississippi tax as nonresidents with no other Mississippi income would be about $45,600: 4% of the gain above the first $10,000, before any deductions. The affidavit leaves about $11,900 to come back as a refund instead of about $49,400. File the affidavit.

How a 1031 exchange changes the Mississippi tax

A properly structured 1031 exchange defers the Mississippi tax as well as the federal tax. Miss. Code 27-7-9(f) says no gain is recognized when property held for business or investment is exchanged for like-kind property and no gain is recognized under Section 1031. In the example, buying a replacement of at least $1,900,000 with all $1,000,000 of net cash reinvested would defer the full $336,515.

Mississippi has no clawback, so a Gulf Coast or DeSoto County owner can exchange into Tennessee, Texas or Florida without a yearly state tracking form. The nonresident withholding statute applies only to a sale that is not an exchange or trade, so an exchange falls outside it. Our page on the 1031 exchange in Mississippi covers the details, including cash taken at closing.

Cash you keep is boot and is taxed by both governments. The capital gains tax calculator and the 1031 exchange calculator run the federal side for your own figures.

Selling a Mississippi apartment building

Skyline buys apartment buildings with five or more units in Mississippi, from Jackson and the Madison and Rankin county suburbs to Hattiesburg, the Gulf Coast and DeSoto County. We buy directly, close on your timeline, and can work inside 1031 deadlines. If you live out of state, we can help coordinate the 5% payment from the closing proceeds and work from your gain affidavit.

For the carrying cost a buyer will underwrite, see our page on the property tax rate in Mississippi. For notice, deposit and eviction rules, see Mississippi landlord-tenant law for apartment owners.