MISSISSIPPI - Mississippi is entering 2026 with a focus on fiscal conservatism and expanded benefits for state workers. While many Mississippi laws traditionally take effect in July, several major tax reforms and administrative shifts are scheduled to take effect on January 1, 2026.
Here are five of the most significant changes taking effect in the Magnolia State this January.
1. Accelerated Income Tax Cut (HB 1)
Mississippi continues its aggressive push to lower the tax burden on residents. Starting January 1, the top marginal income tax rate will drop to 4.0%.
- This is part of a phased tax-elimination plan passed in previous sessions. The rate was 4.7% in 2024 and 4.4% in 2025.
- The Benefit: All taxable income over $10,000 will now be taxed at this lower flat rate, providing a direct boost to take-home pay for hundreds of thousands of Mississippians.
2. Paid Parental Leave for State Employees (HB 1063)
In a significant shift for the State workforce, House Bill 1063 officially takes effect on January 1, providing paid parental leave to state agency employees.
- The Benefit: State employees who are the primary caregivers of a newborn or newly adopted child are now entitled to six weeks (240 hours) of paid leave at 100% of their regular salary.
- Eligibility: This applies to employees who have been with the state for at least one year. It marks one of the most significant expansions of state employee benefits in recent Mississippi history.
3. Phase-Down of the Capital Stock Tax
Mississippi is continuing its multi-year effort to attract more businesses by reducing the Capital Stock (Franchise) Tax.
- The Milestone: On January 1, the state will implement the subsequent scheduled reduction in the tax rate applied to a company's capital or property.
- Goal: The state aims to eliminate this by 20ly. The 2026 reduction is designed to lower the "cost of doing business" in Mississippi, particularly for capital-intensive industries like manufacturing and logistics.
4. Prepaid Wireless Surcharge Increase
While some taxes are going down, specific fees are increasing to support emergency infrastructure. Starting January 1, the prepaid wireless E911 surcharge will increase.
- The Change: Consumers purchasing prepaid wireless service (such as "pay-as-you-go" phone cards) will see a higher surcharge at the point of sale.
- The Purpose: These funds are dedicated to maintaining and upgrading the State 911 emergency response systems and ensuring that local dispatch centers have the technology needed to locate callers in emergencies.
5. AIR Task Force Annual Reporting (SB 2426)
As Artificial Intelligence becomes more integrated into government and private industry, the Artificial Intelligence Research (AIR) Task Force enters a critical phase this January.
- The Mandate: Created by Senate Bill 2426, the task force is charged with evaluating the risks and opportunities of AI in Mississippi.
- The Milestone: Starting in 2026, state agencies must begin complying with the task force's preliminary inventory and transparency guidelines to ensure that "human-in-the-loop" oversight remains part of consequential government decisions.
Additional Notes for 2026
Mississippians should also keep an eye on the Public Employees' Retirement System (PERS). While the "Tier 5" hybrid retirement plan for new hires doesn't officially begin until March 2026, the administrative transition and training for state agencies on these new contribution rules will be a significant focus throughout January.