Let’s be honest—state taxes are confusing enough without a big shakeup thrown into the mix. If you live in Missouri or invest there, you’ve probably heard the buzz about the state legislature’s plan to eliminate the individual capital gains tax starting in 2025.
It’s a huge deal because Missouri would be the first state in the nation to fully exempt profits from selling stocks, real estate, crypto, and more from state income tax.
If you’re wondering what this means for your wallet, the local economy, or if other states might follow suit, you’re in the right place.
Keep reading, and I’ll break down what you need to know about this landmark change—and what it might mean for you and your financial future.
Missouri’s Capital Gains Tax: What’s Changing?
Starting January 1, 2025, Missouri taxpayers will be able to deduct 100% of their capital gains income when calculating their state adjusted gross income.
That means profits from selling investments like stocks, bonds, property, or cryptocurrency won’t be taxed by the state anymore.
The bill also includes a corporate trigger: if Missouri’s top corporate tax rate ever drops to 4.5% or below, corporations could also get a full capital gains deduction.
This change comes alongside other tax shifts, like replacing the state’s graduated income tax with a flat tax and adding sales tax exemptions for items like diapers and feminine hygiene products to promote equity.
How Does This Compare to Federal Capital Gains Tax?
At the federal level, capital gains are taxed differently based on how long you’ve held the asset:
- Short-term gains (held ≤1 year) are taxed as ordinary income, which can be as high as 37%.
- Long-term gains (held >1 year) enjoy preferential rates—typically 0%, 15%, or 20%, depending on your income.
Missouri, by contrast, used to tax all capital gains as regular income with no preference. So this new law is a big departure, potentially saving investors a significant chunk of change.
Other States Are Going the Other Way
While Missouri is eliminating its capital gains tax, some states are moving in the opposite direction by creating or increasing capital gains taxes. For example:
- Washington State has a 7% capital gains tax on gains over $250,000 annually.
- Minnesota taxes capital gains as ordinary income and added a 1% surtax for high earners, bringing top rates over 10%.
- California, Oregon, and New Jersey also tax capital gains at high ordinary income rates.
So Missouri’s move is quite bold compared to these states, which are focusing more on taxing investment income to boost revenues.
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Who Really Benefits from Missouri’s Tax Cut?
The big winners are likely to be wealthier Missourians who report large capital gains—think investors, business owners, and retirees with sizable portfolios.
Critics argue this benefits mostly the top 5% and may widen economic inequality since higher-income, often white households report the majority of capital gains.
On the flip side, supporters say this policy could attract investors and entrepreneurs, stimulate economic growth, and create jobs.
But opponents worry about a potential $100 million+ annual hit to state revenues, which could affect funding for schools, infrastructure, and public services.
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What Should You Do Now?
If you’re a Missouri resident or considering investing there, this change might influence your financial planning. Keep an eye on whether Gov.
Mike Kehoe signs the bill. If it passes, it could be wise to talk to your tax advisor about timing asset sales or investments to maximize your benefits.
Also, watch for potential ripple effects as other states react to Missouri’s trailblazing move. Tax laws change, but being informed helps you stay ahead.
Bottom Line: Missouri is Making Tax History—But Stay Informed
Missouri’s plan to eliminate individual capital gains tax starting in 2025 is a landmark move with big implications. While it promises potential savings for investors, it also raises questions about fairness and state budgets.
Small changes like this can have big impacts, especially when it comes to your taxes and investments. So don’t just wait and see—stay informed, ask questions, and plan ahead.
Remember, it’s not about getting everything perfect right now, but making smart moves that add up over time.
This article was written by Loretta James. AI tools were used lightly for grammar and formatting, but the ideas, words, and edits are all mine.
