- Governor Mike Kehoe signed HB 594 on July 10, 2025.
- The bill makes some significant changes to the income tax statutes.
Background
On July 10, 2025, Governor Mike Kehoe of Missouri signed HB 594. The legislation contained several important tax provisions including a subtraction for capital gains for individuals’ Missouri taxable income and a pathway to provide a similar subtraction for corporations in the future.
Capital Gain Exemption
For all tax years beginning on or after January 1, 2025, with respect to individual taxpayers, Missouri no longer imposes income tax on capital gains. The exemption is structured as a modification, whereby individuals will subtract all capital gains from federal taxable income when calculating their taxable income for Missouri purposes. For corporations, capital gains are still taxable; however, Missouri provides an opportunity for capital gains to no longer be taxable for corporations in the future. The bill states capital gains for corporations are no longer taxable the year following when the highest individual income tax rate falls below 4.5%. The individual income tax rate for 2025 is 4.7%.
Forvis Mazars Insight: The bill is effective immediately and serves as an opportunity for many taxpayers, especially owners of pass-through entities and individuals, that have sold their business in 2025. Pass-through entity tax owners or individuals who sell a business that triggers capital gain will no longer pay Missouri income tax on that gain.
The Corporate Tax Reduction Trigger
Missouri law provides various mechanisms for a reduction in the individual tax rate, and each reduction is tied to total state tax revenue increases. One consists of an initial annual reduction of 0.15%, and another provides for subsequent annual reductions of 0.1%. Mo. Rev. Stat. § 143.011(3) & (4).
Forvis Mazars Insight: The individual capital gain exemption may impact the timing of the corporate capital gain exemption trigger in the future. If individual capital gains represent a significant state revenue decrease, that could push back the timing for the corporate reduction into the 2030s.
How Forvis Mazars Can Help
Forvis Mazars can assist you in understanding the impact of these law changes on your income tax filing responsibilities and your potential tax liability. We will also be tracking the potential for the elimination of the corporate tax on capital gains based upon state revenue impacts and will update you accordingly.