Missouri is on the verge of a bold tax policy shift: becoming the first U.S. state to fully eliminate capital gains taxes on individual income. The legislation, passed by the Republican-controlled state legislature and backed by Governor Mike Kehoe, would exempt income earned from the sale of stocks, real estate, and other investment assets.
If enacted, the law could reshape Missouri’s attractiveness to high-net-worth individuals and investors, while also raising questions about budget trade-offs and fairness.
The proposal fully exempts capital gains income from Missouri state income tax for individual taxpayers. That includes gains from:
Currently, Missouri taxes capital gains as ordinary income at a flat 4.95% rate. Under the new law, these gains would be excluded from taxable income, starting in the next tax year.
The Missouri Department of Revenue estimates the annual cost of the repeal will range from $262 million to $600 million, depending on asset sales and market activity. Critics point out:
Supporters argue the change will:
For CPAs, tax advisors, and financial planners, this change presents both opportunities and planning considerations:
While many states provide partial exemptions for long-term gains or gains on certain in-state assets, Missouri would be the first to go all-in on a full exemption for all individual capital gains.
This may inspire copycat legislation in other states looking to boost investment and retain wealth — particularly those in the Midwest or Southeast.
Missouri’s capital gains tax repeal represents a significant departure from traditional state income tax policy. Whether it drives growth or deepens budget deficits remains to be seen but for tax professionals, the planning landscape just got more interesting.
At Bizora AI, we’ll continue monitoring state-level tax shifts that affect wealth planning, compliance, and advisory services.