At a time when tax policy is increasingly complex and ever-changing, staying ahead of legislative developments is essential—especially for taxpayers navigating both federal and state tax systems.
Plancorp is headquartered in St. Louis, Missouri, so even though we support clients nationwide, we have kept a close eye on the latest developments surrounding Missouri House Bill 594. This groundbreaking piece of legislation will significantly reshape the tax landscape for Missourians.
What Is House Bill 594?
Passed by Missouri lawmakers in the spring of 2025, House Bill 594, changes the tax law surrounding capital gains income., is now awaiting Governor Mike Kehoe’s signature in Jefferson City.
The bill is expected to be signed into law and, notably, will be retroactive to January 1, 2025, even though its proposed effective date is in August 2025. That timing makes tax planning with this change in mind important even in the current year.
The Big Change: No More State Income Tax on Capital Gains
The core of the bill is simple but impactful: if and when Governor Kehoe signs the bill, Missouri will eliminate the state capital gains tax beginning in 2025.
That means any gains from the sale of publicly traded stock, real estate, businesses, or other capital assets—whether short-term capital gains or long-term capital gains—will no longer be included in Missouri’s taxable income calculation.
Historically, Missouri taxed capital gains at the same income tax rate as ordinary income, up to 4.8%, depending on your tax bracket. This new exemption creates a sharp contrast, especially when compared with the federal capital gains tax, which is still in effect and regulated by the IRS.
If enacted, Missouri will become the first state in the country to fully exempt capital gains from state income tax—a move that’s already attracting national attention.
Why This Matters for Investors
This legislation aims to encourage capital investment and stimulate economic growth, but it also introduces real opportunities for individual investors and business owners:
Higher After-Tax Returns
Without a state capital gains tax, Missouri residents could retain more from their investment income. This change could significantly boost net returns on the sale of appreciated assets.
Strategic Planning Opportunities
Because the bill applies retroactively to the beginning of 2025, investors may want to revisit transactions that already occurred this year. There may be tax exemptions or planning opportunities that could reduce your tax liability.
Business and Real Estate Sales
For entrepreneurs and property owners, Missouri may become an even more appealing place to invest. The removal of capital gains tax could increase the value of deals while reducing the tax burden.
Potential Impact on State Revenues
While the bill represents a tax cut for individuals, some have raised concerns about its long-term impact on state revenues. Proponents argue that increased investment activity and growth will offset the loss.
Our Perspective
At Plancorp, we take a tax-aware, comprehensive approach to financial planning. With CPAs on staff and a deep bench of advisors, we monitor legislative shifts—like HB 594—as well as proposals at the federal level, such as the GOP Tax Bill that was recently signed into law by the president.
Following its signing, Susan Jones, our Director of Tax and Strategic Wealth Transfer, wrote a helpful article outlining changes to capital gains tax rates, tax credits, and other provisions that could affect planning.
Read More: Understanding What the ‘Big Beautiful Bill” Means for You
We also keep tabs on how state-level decisions interact with federal policies. For instance, while Missouri has eliminated capital gains tax, you’ll still need to consider the IRS treatment of those gains and how they appear when you file your federal return.
What Should You Do Now?
If you’re a Missouri resident or otherwise file taxes in the state, this is an important time to assess how the capital gains exemption will influence your broader wealth strategy.
Whether you're considering selling assets, rebalancing your portfolio, or making new investments, these changes will have meaningful implications for both current and future tax years.
Additionally, it’s important to remember that while this bill affects income tax, it does not impact sales tax, which remains in effect for most goods and services.
Let’s Talk
Have questions? Want help understanding how this legislation affects your financial plan?
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