Mississippi: state tax on early 401(k) and IRA withdrawals
Mississippi exempts retirement income once you meet the plan’s retirement requirements, but a payout that the IRS treats as an early distribution on Form 5329 loses that exemption.
Mississippi: state tax on this withdrawal
$1,200
Mississippi exempts retirement income once you meet the plan's retirement requirements; a distribution hit by the federal early tax (Form 5329) is taxable.
| Excluded by the state | $0 |
| Taxed by the state | $40,000 |
| Rate used | 4.00 % |
| State early-distribution tax | $0 |
Worked out by Radif Partners · How we calculate · rules read on the Mississippi revenue department site, tax year 2026
Mississippi exempts retirement income, pensions and annuities from state tax once the recipient has met the plan's retirement requirements, with no age floor and no dollar cap stated in the sources we read. The exemption has a hard edge for early retirees. The Department of Revenue writes that "early distributions are not considered retirement income", and that pensions and annuities "taxable as early or excess distributions under the Federal Internal Revenue Code (see Federal Form 5329) do not qualify." Deferred compensation received before the plan's retirement age or service requirement is taxable too. In 2026 Mississippi taxes the first $10,000 of taxable income at 0 % and the excess at 4 %, down from 4.4 % in 2025. If an early IRA withdrawal makes up $30,000 of Mississippi taxable income, the state tax is $800. Whether a payout covered by a federal exception, such as the rule of 55, is then fully exempt is not spelled out in what we read, so this page does not claim it.
Form 5329 is the dividing line
In Mississippi the question is not your age but how the money is classified. Retirement income is exempt when "the recipient has met the retirement plan requirements." A payout that federal law treats as an early or excess distribution, the kind reported on Form 5329, does not qualify. A 49-year-old who empties part of an IRA to cover a gap year, and pays the IRS 10 % on it, has left the exempt category. Drawn after 59½ with no penalty on Form 5329, the same IRA is generally back on the exempt side.
The state applies the same idea to deferred compensation: distributions received before the plan's retirement age or service requirements are met are taxable.
Mississippi on a penalized IRA payout at 49
Mississippi: state tax on this withdrawal
$480
| Excluded by the state | $0 |
| Taxed by the state | $22,000 |
| Rate used | 4.00 % |
| State early-distribution tax | $0 |
The calculator applies 4 % to the whole withdrawal, which gives $480 on $22,000. That is a ceiling. Mississippi's 2026 schedule leaves the first $10,000 of taxable income at 0 %, so when the withdrawal is most of your Mississippi taxable income the real bill is lower.
The 2026 rate, with the $10,000 band
The Department of Revenue's rate table for 2026 reads: excess of $10,000 of taxable income is taxed at 4 %. The rate was 4.4 % for 2025 and is scheduled at 3.75 % for 2027. Taxable income here is the Mississippi figure after its own exemptions and deductions, not your federal number. With $30,000 of Mississippi taxable income from a penalized IRA payout, $10,000 is taxed at nothing and $20,000 at 4 %: $800.
What we could not confirm: the rule of 55 case
A worker who leaves an employer in the year of the 55th birthday and draws that 401(k) owes no federal 10 % under the rule of 55, and files no penalty on Form 5329. The Mississippi instructions tie the loss of the exemption to that federal status, which suggests the payout could stay exempt. They also require the plan's retirement requirements to be met, and a plan may define retirement in its own terms rather than by a separation at 55. The texts we read do not settle this case. Before relying on it, ask the Department of Revenue or check your plan's definition of retirement. The same caution applies to a 72(t) series started in the forties.
Sequencing the bridge in Mississippi
Because a penalized payout is taxed twice, at the federal 10 % and at the state rate, the early years favor money that is neither: Roth contributions, taxable savings and cash. The low 0 % band can absorb a small IRA withdrawal at little state cost, which is one reason to spread early withdrawals evenly rather than take one large sum. The state comparison page shows where Mississippi sits next to its neighbors.