Missouri Capital Gains Tax: The 100% Subtraction Explained

Missouri has no separate capital gains rate. Since tax year 2025 it has gone further: an individual can subtract the whole federally reported gain from Missouri income, so a gain from stocks, real estate or cryptocurrency that is reported as a capital gain on the federal return adds nothing to Missouri taxable income.

This guide sets out how the subtraction works, who can and cannot claim it, where it goes on the return, how nonresidents and home sales fit in, and one point on which the Department's own pages are not consistent. It uses Missouri Department of Revenue pages, the Missouri statutes and two IRS pages, all read on 2 November 2026.

What Changed: House Bill 594

The Department of Revenue's news release on House Bill 594 says that, effective January 1, 2025, individuals can deduct 100% of all capital gains reported for federal income tax purposes when calculating their Missouri adjusted gross income, and that this applies to both short-term and long-term gains from assets such as stocks, real estate and cryptocurrency. The statute, section 143.121 of the Revised Statutes of Missouri, makes the subtraction available for tax years beginning on or after January 1, 2025, for an individual subject to the resident income tax in section 143.011.

The Department's release also says tax preparers may want to review client withholdings and adjust them downward where clients are expected to be affected.

How to Claim It: Form MO-A

The Department's capital gains subtraction FAQ says the subtraction is claimed by filing Form MO-A with your MO-1040. Missouri starts from federal adjusted gross income, so the gain is already in your starting figure and the subtraction takes it back out.

For the 2025 tax year the FAQ says the amount treated as a capital gain is the amount shown on line 7a of the federal Form 1040. On a combined return, the FAQ's example has a combined line 7a figure of $10,000, made up of a $5,000 loss for one spouse and a $15,000 gain for the other: the entry on MO-A line 18Y (primary taxpayer) is $0 and the entry on line 18S (secondary taxpayer) is $10,000, because only the spouse who had the gain makes an entry.

What the Subtraction Does Not Cover

• Capital losses: the FAQ says capital losses do not qualify. Losses allowed on the federal return are already in federal adjusted gross income, and the Missouri subtraction cannot be used to subtract them. In letter ruling LR 8397 (28 May 2026) the Department added that only the gain after netting against losses is eligible, so you cannot add the losses back to enlarge the subtraction.
• Mutual fund short-term gain distributions: the same ruling says a mutual fund's distribution of its short-term capital gains is reported as an ordinary dividend on federal Form 1040 line 3b, is not a capital gain in the investor's hands, and does not qualify. Capital gain dividends, which are treated as capital gains, are a different item. The ruling is binding on the Department only for the applicant who asked, so treat it as the Department's stated view.
• Trusts and pass-through entities: the FAQ says a fiduciary cannot claim the subtraction and a pass-through entity subject to PTE tax cannot either. Where a grantor trust is involved and the deemed owner is an individual who reports the gains on their own Form 1040, that individual may claim it.
• Corporations (for now): the statute lets corporations subtract capital gains only for tax years beginning on or after January 1 of the year after the top individual rate is four and one-half percent or less. The Department says the top individual rate for tax year 2025 is 4.7%, so corporations cannot claim it for 2025.

A separate subtraction in the same section, for gains on the sale or exchange of specie, as defined in section 408.010, applies to tax years beginning on or after January 1, 2026.

Rates Still Matter for Everything Else

The subtraction removes the gain, not the rest of your income. Missouri taxes other income on a graduated schedule. In the Department's 2025 table the lowest taxed slice is 2.00% of the excess over $1,313 and the top row is $256 plus 4.70% of the excess over $9,191. The Department's FAQ gives 4.7% as the top rate for tax year 2025. We did not find a published 2026 rate when we read the Department's pages, so check the 2026 MO-1040 instructions when they appear.

Because the gain no longer adds to Missouri taxable income, the Missouri tax it would have cost at the top rate is the amount in the table below. This is our arithmetic (gain times 4.7%) for a filer whose other taxable income is already above $9,191; it is not an official calculation and ignores credits and deductions.

Residents, Nonresidents and Part-Year Residents

Section 143.011 imposes the tax on the Missouri taxable income of every resident, and the Department's FAQ says the subtraction is for an individual subject to tax under that section. Nonresidents are taxed under section 143.041 on income derived from Missouri sources, in the ratio of Missouri-source adjusted gross income to adjusted gross income from all sources, applied to the tax that would apply as a resident. The Department's guide says Form MO-NRI lets a nonresident, part-year resident or military taxpayer allocate income on that basis, and that all income earned in Missouri is taxable to Missouri.

We did not find a Department statement on whether a nonresident may claim the capital gains subtraction on a Missouri-source gain, so we do not state it either way. If you sold Missouri real estate or Missouri business property as a nonresident, ask the Department or a preparer before relying on the subtraction.

Selling a Home and the Federal Side

The Missouri subtraction works on gain that is reported as a capital gain on the federal return. IRS Topic 701 says you may qualify to exclude up to $250,000 of the gain from the sale of your main home from your income, or up to $500,000 if you file a joint return with your spouse. We read that as leaving only the gain above the exclusion on the federal return for the Missouri subtraction to act on. For the federal test, see our home sale capital gains guide.

Federal tax still applies in full. IRS Topic 409 says an asset held more than one year gives a long-term gain, and that net short-term capital gains are taxed as ordinary income at graduated rates. Missouri's subtraction does not change either rule.

A Point the Department's Pages Disagree On (and the Form That Settles It)

The statute, the news release, the legislative changes document and the first answer in the Department's capital gains FAQ all give 2025 as the first year. One later sentence in that FAQ says the subtraction applies to tax years beginning on or after January 1, 2026 and that you can first claim it on your 2026 return filed in 2027. That sentence conflicts with the other documents, and the same FAQ's own example uses the 2025 tax year and line 7a of the federal form.

The 2025 Form MO-A settles the practical question: it has a line 18, "Capital Gain", with entries 18Y and 18S for the two spouses. Letter ruling LR 8397 also quotes the 2025 Form MO-1040 instruction for MO-A line 18 as telling you to enter the capital gains reported on federal Form 1040 line 7a. So the subtraction is claimable on a 2025 return, which is what the statute says. We could not read the 2025 MO-1040 instructions directly, so check them when you file.