Mississippi does not offer any tax credits or exclusions for investments in qualified small businesses.
Federal QSBS Exclusions and State Tax Implications
Allowing capital gains tax exclusions for Qualified Small Business Stocks (QSBS) encourages investment in US small business. QSBS laws help provide capital for these businesses while offering a savvy tax strategy for investors who want to minimize capital gains taxes.
Investors who hold qualified small business stock for at least 5 years can exclude up to $10,000,000 or more of their recognized capital gains from their taxable income if certain criteria are met.
Learn more about the criteria for Qualified Small Business Stock.
Each state has its own treatment of QSBS gains at the state income tax level. There are three ways in which states typically address the exclusion.
- Some states fully conform to the Federal QSBS guidelines, and therefore allow a full exemption if the stock meets the Section 1202 QSBS criteria. States conform to the federal tax code on either a static or rolling basis. “Static” conformity means the state starts conforming to the Internal Revenue Code as of a specific date. “Rolling” conformity means that the state adopts IRC changes as they occur. Alternatively, certain states do not have state income taxes and therefore there is no QSBS implication at the state level.
- Some states partially conform to the Federal QSBS guidelines, whereby the capital gains from QSBS are exempt if additional criteria beyond the Federal guidelines are met, such as only allowing exemptions if the QSBS gains were from a company doing business in that state.
- Lastly, certain states do not allow any capital gains exclusions for QSBS.
Find out how QSBS is recognized by each state here.
Mississippi QSBS Exemptions
Mississippi does not offer any tax credits or exclusions for investments in qualified small businesses.
Mississippi Capital Gains Tax Rates
The state of Mississippi taxes capital gains at the same rate as income taxes. There are four tax brackets that range from 0% for income up to $3,000 to 5% for income over $10,000. These brackets are the same for every filing status.
In comparison, federal capital gains tax rates only have 3 brackets for single taxpayers which are:
- 0% for $0 to $39,375
- 15% for $39,376 to $434,550
- 20% for $434,551 or more
Entrepreneurship in Mississippi
The Mississippi Development Authority states that, “Entrepreneurship is the lifeblood of Mississippi’s economy, and we regularly rank among the best states in the nation for starting and sustaining a new business. Mississippi’s pro-business climate, combined with the wealth of services available to support startup companies, makes our state a perfect place to start a business.”
The Entrepreneur Center offers general business assistance, finance and accounting, marketing, retail assistance, and other learning opportunities.
Ideagist as a comprehensive list of startup accelerators and incubators in the state of Mississippi.
Among other industries, the following industries in particular thrive in the state:
- Agriculture, Fishing, and Forestry
- Manufacturing
- Mining
- Tourism and Entertainment
- Transportation
Mississippi State Incentives for Small Business
The state of Mississippi offers a Skills Training Income Tax Credit which can be applied to state income tax to reduce an employer’s income tax liability.
“These credits are earned by certain types of businesses that offer training to their employees in Mississippi.”
Additionally, the state has a variety of loan programs that specialize in providing capital or funds to small businesses within certain categories including agriculture, broadband, minority-owned, and infrastructure improvement.
Mississippi Opportunity Zones
Mississippi is home to approximately 100 Opportunity Zones.
Opportunity Zones (OZ) were created to help economically distressed areas by giving investors preferential tax treatment with new investments in these “specified” areas. Similar to QSBS, if the investment meets eligibility criteria and is held for at least 5 years, the investor can defer or be exempted from capital gains taxes (i.e. if held for at least 5 years, the taxpayer can exclude 10% of the gain and the percentage increases (or “steps up”) to 15% after 7 years).
Opportunity Zone investments can be in the stock of an OZ Qualified Business, an OZ partnership interest or an OZ business property.
To be a Qualified Opportunity Zone Business, the business must meet requirements such as at least 50% of the business’s total gross income being derived from within the Opportunity Zone. To learn more about Opportunity Zone qualifications, please refer to the Opportunity Zones and QSBS article.
Under the Tax Cuts and Jobs Act of 2017, 26 USC 1400Z-2, Mississippi made Opportunity Zones, is also home to the associated tax relief incentives that accompany these zones which are effective for tax years beginning on or after December 31, 2017. Refer to this mapfor the Opportunity Zones in the state and here for all Opportunity Zones in the United States.
The Four Opportunity Zone Funds in Mississippi include:
- Maxus Opportunity Fund I (Commercial, Residential)
- Peachtree Hotel Group (Hotel)
- Revolution Wealth Opportunity Zone Fund (Energy Development, Infrastructure, Mixed-Use)
- Woodforest CEI-Boulos Opportunity Fund (Workforce Housing)
Find out more information at the Opportunity Zone Database
This article does not constitute legal or tax advice. Please consult with your legal or tax advisor with respect to your particular circumstance.
