Missouri Is The First State To Eliminate Capital Gains Tax For Individuals: Here's What That Means

LAKE OF THE OZARKS, Mo. — Missourians selling property, stocks, or other investments could see significant state tax savings under a new law eliminating the state income tax on capital gains.

Governor Mike Kehoe signed House Bill 594 on July 10, ending the state’s taxation of capital gains for individual taxpayers beginning January 1, 2025. The change allows Missourians to subtract any capital gains reported on their federal returns from their Missouri taxable income.

This bill also exempts diapers, incontinence products, and feminine hygiene products from state and local sales and use taxes.

According to the governor’s office, Missouri is the first state with a personal income tax to fully exempt individuals from paying state tax on capital gains.

"Conservative leadership is about keeping more money in the hands of Missouri families, and less in government coffers," said Governor Kehoe in a press release. "We are protecting the people who make Missouri work—families, job creators, and small business owners—by cutting taxes, rolling back overreach, and eliminating costly mandates."

Corporate taxpayers are not yet included in the exemption. Businesses will only qualify once Missouri’s top individual income tax rate drops to 4.5% or lower, down from the current 4.7%, according to tax advisory firm RSM US LLP.

RSM noted estimations of the change will reduce Missouri’s revenue by more than $185 million in 2026, with losses growing to more than $261 million by 2031.

For now, individuals will see the benefit immediately in the 2025 tax year, while businesses will have to wait for further rate reductions before the corporate exemption takes effect.