1031 Exchange in Mississippi
Mississippi conforms to the federal 1031 like-kind exchange rules, so a properly structured exchange defers Mississippi income tax on the same timeline as federal tax. Mississippi has no clawback rule, so it does not recapture deferred gain when you exchange into out-of-state replacement property. Mississippi taxes capital gains as ordinary income at its flat rate — 4.0% for the 2026 tax year on taxable income above $10,000 — and has no statewide real estate transfer or documentary stamp tax. Nonresident sellers face a 5% withholding on gross proceeds over $100,000, but a 1031 exchange can be exempted with an affidavit.
Fast Facts
- State Income Tax on Capital Gains
- Mississippi taxes capital gains as ordinary income at its flat individual income tax rate. That rate is 4.4% for the 2025 tax year and 4.0% for the 2026 tax year, applied only to taxable income above $10,000. There is no separate capital-gains rate.
- Conforms to Federal 1031
- Yes. Under Miss. Code Ann. 27-7-9(f), no gain or loss is recognized on an exchange if no gain or loss is recognized under IRC Section 1031, so a valid federal deferral is recognized for Mississippi tax.
- Clawback Rule
- No. Mississippi does not have a clawback provision that recaptures deferred gain when Mississippi property is exchanged into out-of-state replacement property.
- Non-Resident Withholding
- A nonresident seller of Mississippi real property must remit 5% of the amount realized when gross proceeds exceed $100,000 (Miss. Code Ann. 27-7-308), but a 1031 exchange can be exempted via an affidavit stating no gain is recognized.
- Transfer & Documentary Stamp Tax
- Mississippi has no statewide real estate transfer tax and does not levy documentary stamp taxes on deeds. County recording fees still apply.
Mississippi Conforms to Federal 1031 — With No Clawback
Mississippi is one of the more straightforward states for a like-kind exchange. It conforms to Section 1031 and, unlike states such as California, Oregon, Massachusetts, or Montana, it does not impose a clawback on gain deferred into out-of-state property.
Conformity was settled by House Bill 1585 (2007), which amended Miss. Code Ann. 27-7-9(f) to provide that “no gain or loss shall be recognized on any exchange of property if no gain or loss is recognized with regard to such exchange under Section 1031 of the Internal Revenue Code.” Before that amendment, an old state regulation had effectively required the replacement property to be located inside Mississippi. HB 1585 removed that limitation, so today any transaction that qualifies for tax-deferred treatment federally also qualifies for Mississippi. The practical result is that the state tracks the federal outcome: if your exchange is valid under Section 1031, Mississippi defers the state tax too.
Because Mississippi has no clawback, there is no separate state add-back form to file annually and no state claim on the deferred gain if you move your capital out of Mississippi. When the deferred gain is eventually recognized — for example, on a later fully taxable sale — it is taxed under whatever rules apply at that time to a Mississippi taxpayer or to Mississippi-source income. This is a materially simpler picture than the Oregon or California model, where the state keeps a running tab on cross-state exchanges.
Legal and Tax Considerations
State Income Tax on Capital Gains
Taxed as ordinary income at Mississippi's flat rate: 4.4% (2025) and 4.0% (2026) on taxable income above $10,000. No separate capital-gains rate.
Conforms to Federal 1031
Yes. Miss. Code Ann. 27-7-9(f) recognizes no gain or loss when none is recognized under IRC Section 1031.
Clawback
None. Mississippi does not recapture gain deferred into out-of-state replacement property.
Non-Resident Withholding
5% of the amount realized on Mississippi real property when gross proceeds exceed $100,000 (27-7-308); exemptible for a 1031 exchange via affidavit.
Required Documentation
- Federal Form 8824 (Like-Kind Exchanges), filed with your federal return
- Qualified Intermediary exchange agreement and assignment documents
- Complete closing/settlement statements for both the relinquished and replacement properties
- For a nonresident seller: the affidavit under Miss. Code Ann. 27-7-308 stating no gain is recognized because a 1031 exchange is being performed (to claim the withholding exemption)
Clawback Rule
None
Official References
- Miss. Code Ann. 27-7-9 — Gain or loss on disposition of property (1031 conformity in subsection (f))
- Miss. Code Ann. 27-7-308 — Withholding by seller on gross proceeds realized by nonresident seller of real property
- Mississippi Department of Revenue — Individual Income Tax FAQs
- Mississippi Department of Revenue — Affidavit for Withholding Income Tax on Sale of Real Estate by Non-Resident
- IRS Form 8824 — Like-Kind Exchanges
Mississippi Tax Rate and Transaction Cost Context
Mississippi does not apply a separate, preferential rate to capital gains. Gain from selling investment real estate is folded into ordinary taxable income and taxed at the state’s flat individual income tax rate, which the Legislature has been phasing down. Under the schedule in effect, the rate is 4.4% for the 2025 tax year and 4.0% for the 2026 tax year, applied only to taxable income above $10,000 (the first $10,000 of taxable income is not taxed). The Build Up Mississippi Act, signed in March 2025, continues that phase-down in later years with the stated long-term goal of eliminating the individual income tax. Because the rate is already comparatively low and scheduled to fall further, the dollar value of deferring Mississippi tax through a 1031 exchange is smaller than in high-rate states — but deferral still preserves capital that would otherwise leave the deal, and the federal deferral is typically the larger benefit.
On the transaction side, Mississippi is light on closing-time taxes: the state has no statewide real estate transfer tax and does not impose documentary stamp taxes on deeds. Standard county recording fees still apply to record a deed, but there is no broad-based deed transfer tax layered on top of most conveyances. Note this is distinct from Mississippi’s general sales tax, which applies to many goods but not to the transfer of real property itself.
One item to plan for is nonresident withholding. Under Miss. Code Ann. 27-7-308, when a nonresident sells Mississippi real property and gross proceeds exceed $100,000, the seller must remit 5% of the amount realized to the Department of Revenue. Critically for exchangers, if the seller is performing a 1031 exchange and no gain is to be recognized, the seller may furnish an affidavit to that effect, which addresses the withholding. This is why routing a Mississippi sale through a Qualified Intermediary and documenting the exchange up front matters for nonresident investors.
Step-by-Step Process
- 1
Engage a Qualified Intermediary Before Closing
For a delayed exchange, set up a Qualified Intermediary (QI) before you close on the relinquished Mississippi property. You cannot take actual or constructive receipt of the sale proceeds — the QI holds the funds. If you are a nonresident seller, addressing the exchange up front also lets you use the 27-7-308 affidavit for the 5% nonresident withholding.
- 2
Sell the Relinquished Property
Close the sale with the QI receiving the proceeds. Report the disposition on federal Form 8824. If you are a nonresident and gross proceeds exceed $100,000, provide the affidavit stating no gain is recognized because a 1031 exchange is being performed.
- 3
Identify Replacement Property Within 45 Days
You have 45 calendar days from the sale of the relinquished property to identify potential replacement property in writing, following the federal identification rules (such as the three-property rule or the 200% rule).
- 4
Close on Replacement Property Within 180 Days
You must acquire the replacement property within 180 calendar days of the sale (or your tax-return due date including extensions, if earlier). Only real property held for investment or business use qualifies under post-2017 federal law.
- 5
File Federal and Mississippi Reporting
Report the exchange on federal Form 8824 and carry the results through to your Mississippi return, which follows the federal treatment under Miss. Code Ann. 27-7-9(f). Because Mississippi has no clawback, there is no separate annual state add-back form to track for out-of-state replacement property.
Timeline Calculator
Enter the closing date of your relinquished property to calculate your 1031 exchange deadlines:
Frequently Asked Questions
Yes. Under Miss. Code Ann. 27-7-9(f), amended by House Bill 1585 in 2007, no gain or loss is recognized on an exchange if no gain or loss is recognized under IRC Section 1031. So a properly structured federal 1031 exchange defers Mississippi income tax on the same timeline. The 2007 amendment also removed an older state regulation that had required replacement property to be located inside Mississippi.
No. Mississippi does not have a clawback provision. Unlike California, Oregon, Massachusetts, or Montana, Mississippi does not track and recapture gain deferred into out-of-state replacement property, so there is no separate annual state add-back form to file for a cross-state exchange.
Under Miss. Code Ann. 27-7-308, a nonresident selling Mississippi real property must remit 5% of the amount realized when gross proceeds exceed $100,000. If you are performing a 1031 exchange and no gain is to be recognized, you may provide an affidavit to that effect to address the withholding. This is a key reason nonresident sellers should set up the exchange and paperwork before closing.
Mississippi taxes capital gains as ordinary income at its flat individual income tax rate — 4.4% for the 2025 tax year and 4.0% for the 2026 tax year, applied to taxable income above $10,000. There is no separate, lower capital-gains rate, so any recognized gain (including boot in a partial exchange or gain from a failed exchange) is taxed at that flat rate. Check the Mississippi Department of Revenue for the current year's figure, since the rate is scheduled to keep declining.
No. Mississippi has no statewide real estate transfer tax and does not impose documentary stamp taxes on deeds. County recording fees still apply to record a deed, but there is no broad-based deed transfer tax on most conveyances, which keeps closing-time friction costs relatively low.
Related Guides
- What Is a 1031 Exchange? — the complete federal framework, deadlines, and rules
- 1031 Exchange by State — compare Mississippi with other states’ rules and clawback provisions
- Jackson, MS
- Gulfport-Biloxi-Pascagoula, MS
- Hattiesburg, MS
References
Official References
- Miss. Code Ann. 27-7-9 — Gain or loss on disposition of property
- Miss. Code Ann. 27-7-308 — Nonresident seller withholding on real property
- Mississippi Department of Revenue — Individual Income Tax FAQs
- Mississippi Department of Revenue — Affidavit for Withholding on Sale of Real Estate by Non-Resident
- IRS Form 8824 — Like-Kind Exchanges
This information is for educational purposes only and is not legal or tax advice. Consult with qualified professionals regarding your specific situation.