Alert
Missouri’s Landmark Legislation Introduces Significant Tax Changes
In a sweeping move that significantly reshapes Missouri’s tax landscape, the state legislature has passed a landmark bill that not only eliminates capital gains taxes on individual income but also introduces targeted tax relief measures for seniors, disabled residents, and families.
These provisions were critical in obtaining bipartisan support for the broader tax package, which has been met with both enthusiasm and concern due to its projected impact on state revenue and social equity.
Discover why Missouri’s new legislation is noteworthy and how it can impact individual taxpayers with the following insights.
Key Provisions of the New Law
At the core of the new legislation is the complete exemption of capital gains from individual income taxes beginning January 1, 2025, including profits from the sale of:
- Stocks
- Real estate
- Businesses
- Bonds
- Digital assets such as cryptocurrency
Supporters of the policy, including Governor Mike Kehoe and the Republican-majority Legislature, argue that removing the tax on investment gains will encourage entrepreneurship, increase business investment activity in the state, and make Missouri a more attractive destination for both individuals and businesses. Supporters of the exemption point to states like Florida and Texas, which have already attracted significant investment due to these states not imposing an income tax.
The legislation also includes a provision for corporations: if Missouri’s top corporate income tax rate drops to 4.5% or lower in the future, corporations could also deduct 100% of their capital gains income.
Targeted Relief for Older Adults and Disabled Missourians
The landmark legislation also includes additional tax deductions and credits for older adults and residents with disabilities. Specifically, the bill expands the Missouri Property Tax Credit—commonly referred to as the circuit breaker credit.
This credit provides financial relief to low-income seniors and disabled individuals who own their homes and pay property taxes or pay rent. Under the new law, income thresholds and maximum credit amounts are adjusted to account for inflation and rising housing costs, broadening eligibility and increasing the benefit for more Missouri households.
Additionally, the legislation introduces enhanced income tax exemptions for retirement and disability income.
These changes allow a greater portion of Social Security income, pensions, and disability benefits to be excluded from taxable income, providing more available spending income for those living on fixed earnings. Lawmakers emphasized that this measure is especially important as inflation and housing prices continue to affect older Missourians.
Sales Tax Exemptions for Essential Items
To further expand the scope of relief for Missouri taxpayers, the legislation also exempts diapers and feminine hygiene products from state sales tax, effective January 1, 2025. These items, which were previously taxed as standard consumer goods, will now be recognized as essential health-related necessities. Supporters have long advocated for this exemption, arguing that taxing these basic needs unfairly penalizes women, families, and caregivers.
The Missouri Department of Revenue estimates that this tax exemption will result in modest but meaningful savings for families, especially those with young children or those purchasing hygiene products on a regular basis. While the fiscal impact to the state may be relatively small, the social equity implications are significant.
The New Law’s Implications
While the capital gains tax repeal drew criticism for favoring a small percentage of Missouri taxpayers, the inclusion of these social provisions in the legislation helped address concerns and achieve the goals of both sides of the aisle. Lawmakers were able to appeal to a wider range of constituents by pairing investment-related tax cuts with relief aimed at groups often underrepresented in tax policy.
With the elimination of state capital gains taxes, Missouri becomes an attractive destination for investors, particularly those involved in cryptocurrency and real estate markets. This policy shift may influence other states to consider similar tax reforms to attract investment and stimulate economic growth.
While the new law is set to take effect in 2025, questions remain about its long-term impact on Missouri’s fiscal health. The Missouri Budget Project estimates that the capital gains exemption alone could reduce state revenue by $262 million to $600 million annually. As the state moves forward with implementation, policymakers and advocacy groups will be closely watching how these changes affect revenue collections and household financial stability. Combined, these exemptions represent a shift toward more inclusive tax policy in Missouri—one that attempts to balance economic growth with social responsibility.
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To learn more about Missouri’s new tax legislation and how it can impact your taxes, contact your firm professional.