On July 10, 2025, Missouri Gov. Mike Kehoe signed HB 594, which makes the following changes to Missouri’s tax laws:
Elimination of Individual Income Tax on Capital Gains
The most significant change grants individuals a 100% deduction for all forms of capital gain income (both long-term and short-term) as reported for federal income tax purposes for tax years beginning on and after Jan. 1, 2025. Currently, it appears that the bill only provides the 100% capital gain deduction to individuals, not estates and trusts. The bill also provides corporations with a 100% deduction for capital gain income, but that provision will not take effect until the year after Missouri’s top individual tax rate falls to or below 4.5%. The top personal tax rate is currently 4.8% and may not fall to or below 4.5% in the future, so the corporate capital gains deduction is currently inoperative.
Emergency Services Sales Tax Increase
Currently, Missouri law allows local fire protection districts to levy a .5% sales tax to cover the costs of emergency services. The new law will allow this tax to be imposed at rates up to 1%, and it repeals the prohibition on certain counties from imposing such a tax. However, any such tax increase must first be approved through voter referendum, and the authority imposing a property tax to provide emergency services must reduce the property tax levy in an amount equal to 50% of the revenue generated by the sales tax imposed under the law.
Exemption from Sales Tax for Certain Hygiene Products
The new law provides an exemption from sales tax on the retail sale of diapers, feminine hygiene, and incontinence products. This provision is effective immediately.
Exemption from Sales for Broadband Communications Equipment
Beginning in 2026, providers of broadband communications service will be able to purchase machinery and equipment used to provide broadband communications service without paying sales tax by providing vendors with an exemption certificate.
Ozark and Other County Sales Taxes
Missouri’s sales tax law limits the aggregate sales tax rate levied by any county to 1%; the new law increases the limit to 1.5% for Ozark County, provided that any taxes collected over 1% are used for law enforcement services. Additionally, any other county sales tax levies approved during the 2022 general election will be deemed to be compliant with state law if the aggregate amount of tax levied under the state’s County Sales Tax Act does not exceed 1.5%.
There are other minor changes to the state’s laws in the areas of transient overnight guest room taxes, property taxes for senior citizens and disabled veterans, and limitations of sales taxes imposed by certain localities that are less significant but may concern you personally. If you have any questions about these upcoming changes to Missouri’s tax laws, please contact your CBIZ tax professional.
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