In July 2025, Governor Mike Kehoe signed House Bill 594, a groundbreaking reform that retroactively eliminates all Missouri state capital gains taxes for individuals, effective January 1, 2025. With this law, Missouri becomes the first U.S. state imposing an individual income tax to completely exempt personal capital gains from state taxation. Now, all capital gains—whether short-term or long-term, from sales of stocks, bonds, real estate, cryptocurrency, or businesses—are fully deductible from Missouri taxable income, thanks to a 100% subtraction for individuals.
This tax shift delivers powerful incentives across the board:
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- Real estate investors—especially those holding rental properties—face less friction when deciding to sell, since state taxes no longer eat into their gains.
- Homeowners considering selling due to profit or lifestyle changes may now benefit from greater net proceeds.
- Other asset holders (e.g., stocks or crypto investors) can also capitalize on improved after-tax returns.
But it’s important to be clear: federal capital gains taxes still apply. Long-term gains remain subject to 0%, 15%, or 20%, depending on income level, while short-term gains are taxed as ordinary income. Missouri’s reform exclusively addresses state tax liability, leaving federal obligations untouched.
Consider this scenario: A real estate investor bought a rental property 10 years ago for $150,000, has taken $25,000 in depreciation, and is now selling it for $300,000 in 2025. Here’s how the Missouri state tax savings break down:
- Calculate gain:
– Sale price: $300,000
– Adjusted basis (purchase price minus depreciation): $150,000 − $25,000 = $125,000
– Capital gain: $300,000 − $125,000 = $175,000 - State tax under prior law (4.8% top rate):
$175,000 × 4.8% = $8,400 in Missouri state tax liability. - With HB 594 in effect:
That $8,400 in state taxes is entirely eliminated—meaning the investor now keeps an additional $8,400 compared to pre‑2025 law.
Clarification: This is state-level relief only. The investor still owes federal capital gains tax, determined by whether the gain is short-term or long-term (0%, 15%, or 20%). HB 594 simply removes the Missouri tax burden, dramatically improving the after-tax outcome for sellers as of 2025.
Let’s have a real conversation about real estate. I’m ready when you are.
Sandie Hea
SandieHea.com
sandie.hea@stlre.com
314.806.1908
