Updated October 8, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The Department of Revenue says “Mississippi generally follows IRS rules concerning computation of capital gains and losses.” Gain above the exclusion is taxed at 4.0% for tax year 2026 on income over $10,000, down from 4.4% for 2025.
Mississippi tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Generally follows IRS rules on computing capital gains; a 2009 Department bulletin says Mississippi follows the federal treatment of a personal residence |
| Rate on gain above the exclusion | Flat 4.0% for 2026 on income over the first $10,000 (4.4% for 2025) |
| Collected at the sale | Nonresident sellers only: income tax withheld at 5% of the gain on the current Form 89-386 (Rev. 10/25), limited to net proceeds |
| Source | Mississippi Department of Revenue; Mississippi State Tax Commission (Department of Revenue) |
What the Mississippi documents say
The 2025 instructions say “Mississippi generally follows IRS rules concerning computation of capital gains and losses.” A 2009 Department of Revenue bulletin on gains from dealings in property is more direct: “Mississippi follows the federal treatment on the disposition of a personal residence.” That bulletin is old, and this page does not rely on the dollar amounts it prints.
On the rate, the 2025 instructions say “4.4% on taxable income in excess of $10,000.00.” The Department’s 2026 withholding publication prints “Remaining balance (excess of $10,000) 4.0%” for tax year 2026, and the 2024 instructions list “Tax Year 2026 Excess of $10,000 @ 4%”.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Mississippi sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by Mississippi. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000 and, computed as that excess times 4.0%, the tax at the flat rate would be $4,000, before any other adjustment and assuming the first $10,000 of taxable income is already used.
What is collected at the sale
For a nonresident seller of Mississippi real estate, the current Form 89-386 (Rev. 10/25) computes the withholding as “Income tax at 5% of the gain”, limited to the smaller of that tax or the seller’s net proceeds. That 5% is the withholding rate, separate from the 4.0% income tax rate for 2026, and the form prints no principal-residence exemption. It does not apply to resident sellers.
What changes in 2026
Mississippi: the rate on income above the first $10,000 falls from 4.4% for tax year 2025 to 4.0% for tax year 2026.
What the documents do not say
- The conformity sentences are general and the personal residence statement is in a 2009 bulletin; no current document read prints the $250,000 and $500,000 limits. The 2026 rate comes from the Department’s withholding publication, not an enacted statute page. The 5% withholding rate is from the current Form 89-386 (Rev. 10/25); the final tax is settled on the return.
Common mistakes
- Using the 4.4% rate printed in the 2025 instructions for a 2026 sale; the 2026 rate is 4.0% on the documents read.
- Treating the 5% nonresident withholding as a rule for Mississippi residents.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Mississippi taxes capital gains, Mississippi retirement taxes, and home sale exclusion calculator.
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Answer againSources
- 2025 Form 80-100-25-1-1-000 Resident, Non-Resident and Part-Year Resident Income Tax Instructions: https://www.dor.ms.gov/sites/default/files/tax-forms/individual/80100251%202.pdf
- 2024 Form 80-100-24-1-1-000 Resident, Non-Resident and Part-Year Resident Income Tax Instructions: https://www.dor.ms.gov/sites/default/files/tax-forms/individual/80100241.pdf
- Gains: Dealings in Property (80-501-09-02): https://www.dor.ms.gov/sites/default/files/notices-technical-bulletins/corp_tb.gainsinproperties.pdf
- Form 89-386 Affidavit for Withholding Income Tax on Sale of Real Estate by Non-Resident (Rev. 10/25): https://www.dor.ms.gov/sites/default/files/tax-forms/business/89386258.pdf
- Pub 89-700-25-1 Withholding Tax Instructions (income tax rates table, Tax Year 2026): https://www.dor.ms.gov/sites/default/files/tax-forms/business/89700251revised1.13.2026.pdf
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
Sources: the primary documents linked above, read on October 8, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.