Missouri Just Eliminated Capital Gains Taxes—Here’s What That Means for Home Sellers and Real Estate Investors

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Starting in the 2025 tax year, Missouri will allow individuals to deduct 100% of capital gains reported on their federal tax return from their state taxable income, effectively eliminating the capital gains tax for individual filers at the state level.

House Bill 594, signed by Gov. Mike Kehoe this month, authorizes a full state income tax deduction for gains on assets held for more than one year, aligning with the federal definition of long-term capital gains.

That means Missourians who sell a home, investment property, business, or appreciated assets like stocks could see a significant drop in their state tax liability.

“Conservative leadership is about keeping more money in the hands of Missouri families, and less in government coffers,” Kehoe said in a statement. “Today, we are protecting the people who make Missouri work—families, job creators, and small-business owners—by cutting taxes, rolling back overreach, and eliminating costly mandates.”

So, who stands to benefit most?

Game-changer for Missouri homeowners and investors

“Now that Missouri’s zero capital gains tax is active, the floodgates are open,” says Eric Croak, CFP, Accredited Wealth Management Advisor, and the president of Croak Capital.

That’s because the capital gains tax is thought to have been holding up an already stagnant market. It’s a topic that has come into the national spotlight after Rep. Marjorie Taylor Greene introduced the No Tax on Home Sales Act, a bill that would eliminate the capital gains tax on the sale of primary residences, and President Donald Trump recently said he was “thinking about that.”

Nearly 29 million households across the country have built up more equity in their home than the federal capital gains tax exclusion for single filers protects, according to research from the National Association of Realtors®. In Missouri, 14.3% of homeowners currently exceed the capital gains tax exclusion for single filers with an average potential tax liability of over $22,900.

That liability is thought to be keeping many homeowners who want to sell stuck. But now, Missourians won’t have to pay state income tax on that capital gains liability, and the benefits extend far beyond homeowners.

“Anyone who sold real estate, business equity, or appreciated stock this year just skipped a five-figure check to the state,” explains Croak.

Advocates of capital gains tax reform say that this could provide the lubrication needed to unstick the housing market.

“A $500,000 gain now keeps every penny of that gain,” Croak says. “That changes behavior instantly. People are no longer timing around federal changes; they are optimizing for their state line. And in Missouri, I can tell you, selling is suddenly a growth strategy.”

But a few key things haven’t changed. Federal capital gains taxes still apply, so you’ll still owe taxes to the IRS based on your income and how long you held the asset. However, you won’t have to pay state income tax on those gains as was previously mandated in Missouri.

A new reason to sell in 2025

While Greene’s federal proposal focuses on primary homeowners, Missouri’s new law goes much further—offering major tax advantages to real estate investors, house flippers, and anyone who turns a profit on asset sales.

For investors who’ve held off on selling due to state tax implications, this change could be the tipping point. But Missouri businesses may have the most to gain.

“Business owners are the dark horse winners here,” says Croak. “Someone selling a $3 million company this year with $2 million in gains just banked an extra $100,000. We are talking real money.”

It’s a rare moment when state tax timing and market strategy align, and savvy sellers are already planning accordingly.

“Deals are getting pushed across the line faster now that tax savings are locked in. Missouri just became the best state to sell a company [in] in the country, hands down,” says Croak.

The incentive is coming at a significant cost to the state. HB 594 is estimated to reduce state revenue by almost $430 million in the first year alone, and roughly $340 million annually thereafter, according to the bill’s fiscal note. And there are some who suggest the costs could be far greater—closer to $600 million or more, according to the Institute on Taxation and Economic Policy.

Will this spur more listings?

Croak is also optimistic when it comes to the outlook for Missouri’s housing market.

“A colleague I spoke with offloaded two properties worth $850,000 total and banked a full $300,000 gain [state income] tax-free,” he says. “On top of that, real estate investors are dumping low-yield properties en masse. The ones holding legacy rentals with $100K to $200K of paper gain are rotating into higher-return markets out of state. Missouri just turned into a 1031 exit hatch even for those who are not 1031-ing.”

What Croak is referring to is the 1031 exchange—a federal tax rule that allows investors to defer capital gains taxes when swapping one investment property for another. But now, thanks to Missouri’s full capital gains deduction, even investors who don’t use a 1031 exchange can offload properties without the same tax liability issues. That’s a game-changer for landlords who were sitting on appreciated properties but hesitant to sell due to the tax hit.

The upshot? Missouri could see a wave of new listings from investors looking to cash out while conditions are favorable—especially those in low-growth or cash flow-challenged markets.

What you should do if you’re thinking of selling

Before jumping to list your home or investment property, talk to a tax adviser. Missouri’s new law eliminates income tax on capital gains tax at the state level, but federal capital gains taxes still apply, and the overall impact of Missouri’s reforms will depend on your specific situation.

Still, for high-gain assets, the exemption could significantly boost your net proceeds. Whether you’re downsizing, offloading a rental, or cashing out of a business, this could be the most tax-efficient year to sell in Missouri.

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