Missouri’s new capital gains tax legislation goes into effect

Missouri has officially become the first in the nation to enact a tax cut that exempts capital gains from income taxes.

House Bill 594, signed into law by Gov. Mike Kehoe in July, went into effect today and includes several tax provisions. Kehoe said at a July 28 Springfield Area Chamber of Commerce event that the legislation enacts the largest tax cut in state history. It allows individuals to deduct all capital gains taxes and corporate entities to deduct the total amount of their capital gains from their tax obligations each year when the top rate of corporate income tax is equal to or less than 4.5%.

The current top rate of tax imposed on individuals for the 2025 tax year is 4.7%. The earliest date for the next rate cut triggered by revenue would be the start of 2028, according to state budget office estimates.

The capital gains tax cut is retroactive to Jan. 1. It allows a state income tax deduction for gains on assets held for over a year. That includes capital gains, which are profits on investments such as stocks, bonds, real estate including homes and other assets.

State Rep. Chad Perkins, R-Bowling Green, who was elected late last year as speaker pro tem in the House of Representatives, was sponsor of HB 594. He said there was an identical bill in the Senate sponsored by Sen. Curtis Trent, R-Springfield, but added his legislation picked up more support in the House.

Perkins, who is in his fifth year in the House, said it’s not common for a bill to garner enough support to be passed so quickly.

“We were lucky enough to get this done in year number one; the governor signed it, and we really think it’s going to be a shot in the arm to the Missouri economy,” he said.

The bill’s updated fiscal note estimates the change could reduce state revenue in the first year by $157 million. In future years, the bill is estimated to decrease state revenue by roughly $111 million. However, the fiscal note indicates the impact could be significantly larger.

Based on the $13.3 billion in capital gains income Missouri taxpayers claimed for 2022 on their federal income tax forms, taking the 4.7% top rate would yield $625.6 million for fiscal 2026, according to the fiscal note.

But Perkins scoffs at the validity of the fiscal note, which he said are “always put together by bureaucrats.” It also doesn’t account for reinvestment activity, he said.

“That fiscal note never once began to consider the boom to Missouri’s economy,” Perkins said. “If you’re a Missourian who saves a little money on your home sale, what you’re going to do is reinvest that money and most likely into the purchase of another home. That fiscal note never takes that into consideration.”

An expanded version of this article is scheduled to be published in Springfield Business Journal's Sept. 1 print edition.