Capital gains tax in Missouri (2026): selling a business, real estate or farm

What House Bill 594 changed

Missouri used to tax capital gains like wages. House Bill 594 added a new subtraction to RSMo 143.121: for all tax years beginning on or after January 1, 2025, one hundred percent of all income reported as a capital gain for federal income tax purposes by an individual is subtracted in computing Missouri adjusted gross income. The Department of Revenue's announcement lists stocks, real estate and crypto among the covered gains, and the subtraction is not limited to Missouri property or to long-term holdings.

One wrinkle in the paperwork: the DOR's FAQ page says in one answer that the subtraction is effective for 2025 and in another that it is first claimed on the 2026 return. The statute and the DOR's year-changes page both say tax year 2025, which is the reading this page uses.

The word that matters: reported as capital gain

The subtraction follows the federal label, so the question for any sale is which dollars the federal return calls capital gain. For tax year 2025 the DOR ties the amount to line 7a of federal Form 1040, the capital gain line. That produces a split inside a typical business or property sale:

• Subtracted: long-term and short-term capital gain, net Section 1231 gain on land, buildings and goodwill that the federal return treats as capital gain, and unrecaptured Section 1250 gain on real estate (taxed federally at up to 25% under IRC 1(h), 2026), since it flows through line 7a.
• Still taxed at Missouri's 4.7% top rate (2026): Section 1245 recapture on equipment and vehicles, inventory, cash-basis receivables, payments for a non-compete or consulting agreement, and interest on a seller-financed note.

That is why the worked example still shows $18,800 of Missouri tax: it is 4.7% (2026) on the $400,000 of recapture. For an equipment-heavy seller such as a trucking, construction or manufacturing company, the purchase price allocation now decides the Missouri bill almost by itself. See depreciation recapture for how the ordinary piece is measured.

Missouri versus its neighbors

The subtraction makes Missouri an outlier in the region. In the example, the same $2.4 million sale costs $133,920 in Kansas state tax against $18,800 in Missouri, a difference of $115,120 on one closing. Federal tax is the same in both states: 0%, 15% or 20% on long-term gain, with 20% above $613,700 of joint taxable income (Rev. Proc. 2025-32, 2026), plus the 3.8% net investment income tax for passive owners. See how long-term capital gains are taxed for that layer.

For owners in Kansas City or the Metro East who could credibly live on either side of the line, the residency question is now worth a real look; the residency change analysis covers what a move must look like. Gain on Kansas or Illinois real estate stays taxable in that state no matter where you live.

Who the subtraction does not reach

The statute limits the subtraction to an individual subject to tax under RSMo 143.011, and the DOR's FAQ (2026) fills in the edges:

• Grantor trusts: qualify when the individual owner reports the trust's gain on their own Form 1040.
• Pass-through entities electing the entity-level tax: cannot claim it, because the entity is neither an individual under 143.011 nor a corporation under 143.071. Owners who report their share on their personal returns are the ones who benefit.
• C corporations: not yet. A parallel 100% subtraction under RSMo 143.121 starts the tax year after Missouri's top individual rate falls to 4.5% or lower; it was 4.7% for 2025.
• Capital losses: not subtracted. They already reduce federal AGI, and a joint return enters the gain only for the spouse who had it.

For a corporate seller, the federal Section 338(h)(10) and asset-versus-stock choices carry extra weight, since a C corporation's gain still pays Missouri corporate tax for now.

Does deferral still make sense in Missouri?

Deferral is now mostly a federal decision for Missouri residents. A 1031 exchange still defers federal tax and the 25% rate on unrecaptured Section 1250 gain (IRC 1(h), 2026), but it no longer saves Missouri tax on the capital gain. A Section 453 installment sale still spreads federal brackets; the gain portion of each payment remains capital gain for federal purposes, so it should qualify for the Missouri subtraction in the year received, while the note's interest is ordinary and taxed at 4.7% (2026). If you plan to leave Missouri, the logic flips: collecting a note after moving to a state that taxes gains can cost more than selling for cash while still a resident.

Gold and silver, estate planning and next steps

RSMo 143.121 also adds, for tax years from 2026, a subtraction for capital gain on the sale or exchange of specie, the gold and silver coin defined in section 408.010, which matters to collectors whose federal collectibles gain is taxed at up to 28% (IRC 1(h), 2026). With state tax on gains largely gone, the trade-off between selling now and holding for a step-up at death is now a federal comparison for a Missouri resident. Get the Big Sale Tax Analysis to see how much of your deal Missouri still taxes and what the federal paths cost.

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