28 September 2026 Mississippi does not uniformly adopt the OBBBA's compensation and benefits provisions The One Big Beautiful Bill Act (OBBBA) made numerous changes to federal tax provisions affecting employee compensation, fringe benefits, payroll-related exclusions and other employer-provided benefits. These changes altered the federal income tax treatment of a variety of compensation and benefits items and, in some cases, created new or expanded tax-favored provisions. (See Tax Alert 2025-1476 for more information on the compensation and benefits provisions of the OBBBA.) Because state personal income tax conformity rules vary, the extent to which these federal changes apply for state income tax purposes depends on each state's conformity structure and legislative adoption of the affected Internal Revenue Code (IRC) provisions. The chart below summarizes selected OBBBA compensation and benefits provisions and the corresponding Mississippi personal income tax treatment under current Mississippi authorities. Mississippi personal income tax conformity with the OBBBA — compensation and benefits Internal Revenue Code Section | Description | Effective date | Does Mississippi conform with federal law? | 132(f)(8) | Bicycle commuting benefits. Makes permanent the elimination of the exclusion from gross income for bicycle commuting benefits of up to $20 per month. | January 1, 2026 | Yes. (Miss. Code § 27-7-15(f); Miss. Admin. Code tit. 35. III, subpts. 3 and 4.) | 132(f) | Transportation fringe benefits. Allows a monthly exclusion from gross income for parking benefits of $340 per month and $340 per month for both commuter highway vehicle benefits and transit passes. The monthly limit is indexed each year for inflation. | January 1, 2026 | No. Mississippi does not adopt an exclusion from taxable wages for transportation fringe benefits; therefore, transportation fringe benefits are included in Mississippi taxable wages. (Miss. Code § 27-7-15;Miss. Admin. Code tit. 35. III, subpts. 3 and 4.) | 217(k), 132(g)(2) | Moving expenses. Makes permanent the elimination of the deduction for moving expenses except for members of the Armed Forces and certain members of the intelligence community. | January 1, 2026 | Yes. (Miss. Code § 27-7-15(f), Miss. Admin. Code tit. 35, pt. III, subpt. 4, ch. 1, ¶ 103.) | 224 | No tax on tips. Creates deduction from gross taxable income for qualified tips up to $25,000. | January 1, 2025 (sunset 2028) | No. Mississippi does not adopt the federal exclusion for tips. (Miss. Code § 27-7-15; Miss. Admin. Code tit. 35. III, subpts. 3 and 4.) | 225 | No tax on overtime. Creates deduction from gross taxable income for qualified overtime pay. | January 1, 2025 (sunset 2028) | No. Mississippi does not adopt the federal exclusion for overtime compensation. (Miss. Code § 27-7-15;Miss. Admin. Code tit. 35. III, subpts. 3 and 4.) | 128, 139J | Employer contribution to Trump Accounts. Excludes from gross income employer contributions to an employee's dependent Trump account up to $2,500 per year. | January 1, 2026 | No. Mississippi does not specifically adopt IRC Sections 128 and 139J. (Miss. Code § 27-7-15; Miss. Admin. Code tit. 35, pt. III, subpt. 3, ch. 3, ¶ 103.) | 129(a)(2)(A) | Dependent care assistance. Increases the maximum exclusion from taxable wages for dependent care assistance from $5,000 to $7,500. | January 1, 2026 | Yes. (Miss. Code § 27-7-15; Miss. Admin. Code tit. 35, pt. III, subpt. 3, ch. 3, ¶ 105.) | 127(c)(1)(B) | Educational assistance. Makes permanent that employer payment of a student loan is excluded from income as part of qualified educational assistance and subjects the maximum exclusion of $5,250 to annual inflation adjustments. | January 1, 2026, for student loans; January 1, 2027, for inflation adjustments to maximum exclusion | Yes. (Miss. Code § 27-7-15; Miss. Admin. Code tit. 35, pt. III, subpt. 3, ch. 3, ¶ 105.) |
Ernst & Young LLP insights Employers should confirm that system taxability configurations comply with the differences in taxable wages under federal and Mississippi tax code and monitor developments closely in the future. Employers should also be aware that other states may conform differently to the federal IRC, making this an essential state research activity in 2026 and future years. | * * * * * * * * * * | | Contact Information | For additional information concerning this Alert, please contact: Workforce Tax Services - Employment Tax Advisory Services EY Personal Finance | | Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor |
Document ID: 2026-2066 |
