Rental Property Taxes in Mississippi (2026 Guide)

1. Property Tax: the 10%-vs-15% Assessment Trap

This is the single most important Mississippi landlord fact. The state taxes property on an assessment ratio applied to a county-set "true value," and rentals draw the worse class (Miss. Code 27-35-4):

• Class I — single-family, owner-occupied residential — 10% of true value.
• Class II — all other real property, including rentals — 15% of true value, a 50% higher taxable base for an identical home.

2. Income Tax: Flat 4% and Phasing Out (HB 1, 2025)

Mississippi has a near-flat individual income tax: the first $10,000 of taxable income is taxed at 0%, and everything above it is taxed at a single flat rate. For 2026 that rate is 4% — the figure set by HB 531 (2022) and left in place for 2026 by HB 1 (2025), the "Build Up Mississippi Act."

• 2026: 4% on taxable income over $10,000 (first $10,000 at 0%).
• HB 1 then steps the rate down further — 3.75% (2027), 3.5% (2028), 3.25% (2029), and 3% (2030) — with conditional triggers aimed at full elimination thereafter.
• Rental net income flows onto the MS return from your federal Schedule E. There is no separate, lower rate for rental or passive income — it is taxed at the same flat rate as wages.

3. Capital Gains: Taxed as Ordinary Income

Mississippi has no preferential capital-gains rate — a gain on the sale of a rental is taxed at the same flat 4% (over $10,000) as ordinary income, with no long-term discount.

There is a narrow Mississippi gain exclusion (Miss. Code 27-7-9(f)(10)): no gain is recognized on the sale of authorized shares of corporations and financial institutions domiciled in Mississippi, or partnership/LLC interests in domestic entities, held more than one year. Read it carefully — it applies to selling an equity interest in a Mississippi-domiciled entity, not to a landlord selling the underlying rental real estate. Directly-held rental property does not qualify, and holding a property inside an LLC does not convert a real-estate sale into an exempt share sale. Treat this exclusion as out of reach for ordinary rental dispositions unless a Mississippi tax professional confirms it on your specific facts.

4. Bonus Depreciation: Mississippi Conforms

Good news for landlords: Mississippi conforms to federal bonus depreciation under IRC §168(k) (Miss. Code 27-7-17(1)(f); adopted via SB 3101 (2023) and MS DOR Notice 80-23-003). The bonus depreciation you claim federally on qualifying improvement property carries through to your Mississippi return with no add-back — so a cost-segregation study or qualified-improvement deduction reduces both your federal and your Mississippi taxable income in the same year.

5. No Real-Estate Transfer Tax

Mississippi imposes no real-estate transfer tax, no documentary-stamp tax, and no deed-transfer tax — it is one of a minority of states with none. Buying or selling a rental costs only the ordinary county deed-recording fee, not a percentage of the sale price. That is a real saving on disposition compared with most neighboring states.

6. LLC Annual Report: Free but Mandatory

A Mississippi LLC files an annual report with the Secretary of State that costs $0 for a domestic LLC — but the filing itself is mandatory, not optional. It is due each year between January 1 and April 15, filed online through the SOS portal.

7. Rent Control

Mississippi preempts local rent control (Miss. Code 21-17-5(2)(h)): without prior legislative approval, a municipality may not regulate, directly or indirectly, the amount of rent charged for leasing private residential property in which it has no property interest. You set rents at market.

8. Security Deposit Rules

• No statutory cap on the deposit amount (Miss. Code 89-8-21).
• Return within 45 days of the tenancy ending, delivery of possession, and the tenant's demand — with a written itemized statement of any amounts withheld.
• Allowed deductions cover unpaid rent, tenant-caused damage beyond ordinary wear and tear, and cleaning. Withholding in bad faith can expose you to damages up to $200 on top of the tenant's actual damages.

9. How SheltrIQ Helps Mississippi Landlords

Mississippi's rate is moving every year — SheltrIQ keeps your numbers on the current rules:

• Year-aware income modeling — applies the flat 4% (first $10,000 exempt) for 2026 and tracks the HB 1 step-downs (3.75% in 2027 and beyond) so projections do not go stale.
• Bonus-depreciation tracking — because Mississippi conforms to §168(k), SheltrIQ flows your federal bonus deduction straight through with no add-back to reconcile.
• Disposition modeling — taxes a rental sale at the ordinary flat rate (no LTCG discount) and accounts for Mississippi's lack of a transfer tax on the sale.
• AI Schedule E classification — sorts each expense to the right line so your Mississippi income starts from an accurate federal return.