Thinking about selling a home or rental in Kirkwood in 2025? Missouri just changed how the state treats capital gains, and it could put more money in your pocket at closing. You want a clear, practical answer to what you will actually keep after taxes. In this guide, you will learn what changed, how it interacts with federal rules, and what it means for your sale, exchange, or investment strategy in Kirkwood. Let’s dive in.
What changed in Missouri
Missouri now lets individuals subtract 100 percent of capital‑gain income that is reported for federal purposes when calculating Missouri taxable income for tax years starting January 1, 2025. You can see the enacted language in House Bill 594, which updates the Missouri adjusted gross income rules in Sec. 143.121. The bill text spells out the subtraction and effective date.
The legislature approved the bill, and the state recorded it as enacted for the 2025 tax year. You can review the status history on LegiScan’s bill page. Coverage summarized the change as effectively ending state taxation of individual capital gains starting in 2025. Associated Press reporting provides context and scope.
This subtraction applies to both short‑term and long‑term gains as they appear in your federal adjusted gross income. It does not change federal tax rules, exclusions, or deferrals.
What about corporations
There is a separate corporate provision that could allow a 100 percent deduction for corporate capital gains in the future, but it is conditional on a rate trigger and is not available to corporations for 2025. See a practitioner summary of the corporate trigger from Kutak Rock.
How the subtraction works on your return
You will still compute your federal adjusted gross income first. Missouri then starts with that federal number and subtracts the capital gains you reported to the IRS to calculate Missouri AGI. The mechanics live in the Missouri AGI statute that the bill updates. You can confirm the structure in the enrolled bill text.
The Missouri Department of Revenue is updating forms and instructions for 2025 filings. Watch for new MO‑1040 guidance and worksheets before you file your 2025 return. Tax advisors and state‑tax teams have flagged these updates, including Plante Moran’s fall state and local tax brief.
What it means for Kirkwood sellers
Selling your primary residence
Federal home‑sale rules still apply. If you meet the ownership and use test, the federal exclusion typically removes up to $250,000 for single filers or $500,000 for married filing jointly from federal taxable income. If your gain is fully excluded at the federal level, there is nothing for Missouri to subtract. If you have taxable gain above the federal exclusion, Missouri will subtract that amount on your 2025 return so the state will not tax it. For background on how federal gains, exclusions, and sale reporting work, see IRS Publication 544.
Selling a rental or investment property
For investment sales, federal taxes still apply. You may owe federal capital gains, depreciation recapture, and possibly the net investment income tax. Missouri’s new rule removes the state income tax on the recognized gain for individual taxpayers, so your state liability on that gain is zero for 2025 and beyond, but federal tax on the gain and any recapture still applies. For federal treatment of real‑property sales and recapture, review IRS Publication 544.
Doing a 1031 exchange
If your like‑kind exchange defers recognition of gain at the federal level, there is no recognized gain that year in your federal AGI, so there is nothing for Missouri to subtract. If you receive cash boot and recognize some gain, that recognized portion is included in federal AGI and will be subtracted for Missouri. See the IRS overview of like‑kind exchanges in Publication 544.
Trusts, estates, and nonresident sellers
Trusts, estates, and nonresident sellers often need special handling on allocations and fiduciary forms. The subtraction sits in Missouri’s AGI rules and will flow through once the state updates the fiduciary and nonresident worksheets. Coordinate with your CPA for entity or residency nuances.
Net proceeds snapshot for 2025 closings
Here is a simple illustration. Say you sell a Kirkwood rental in 2025 and recognize $100,000 of taxable gain for federal purposes. Before this change, Missouri state income tax could have taken roughly 4 to 5 percent at the top rate, about $4,700 on $100,000. Now, the Missouri subtraction removes that $100,000 from your Missouri taxable income, so your Missouri tax on the gain is $0. You still owe any federal capital‑gains tax and federal depreciation recapture.
Local costs that do not change
State income tax on gains is only one piece of your net sheet. This change does not affect:
- St. Louis County property taxes and assessment methods. Kirkwood’s effective property‑tax burden tends to track the county median, according to Ownwell’s local data.
- Title, escrow, recording, and other closing fees. Missouri has no statewide real estate transfer tax, and local recording practices continue as usual.
Smart planning steps in Kirkwood
Use this quick checklist as you plan your sale or exchange:
- Confirm your closing date is in 2025 or later so the Missouri subtraction applies.
- Ask your CPA for a federal estimate that includes capital gains, depreciation recapture, and possible NIIT.
- Decide early if a 1031 exchange makes sense for your goals and timeline.
- Update your net sheet to remove any Missouri capital‑gains line, but keep all closing costs and federal taxes.
- If you are a nonresident or selling through a trust or estate, align on Missouri forms and allocations with your preparer.
- Gather documentation for basis and improvements so your federal gain is accurate.
- If you plan pre‑sale improvements, focus on ROI. Strategic renovation and expert staging can lift your sale price and compound the benefit of the new state rule.
Ready to position your Kirkwood property for the strongest result under the 2025 rules? Our team pairs design‑forward staging with hands‑on renovation oversight to help you sell beautifully and keep more of what you earn. Reach out to Katie McLaughlin & Liz McDonald to plan your listing strategy.
FAQs
Do I still pay capital gains tax when I sell a Kirkwood home in 2025
- Federal rules still apply, and Missouri now subtracts the federally recognized gain for individuals, so you could owe federal tax but generally not Missouri income tax on that gain for 2025 and beyond; see IRS Publication 544 for federal context.
How do Missouri’s new rules treat short‑term and long‑term gains
- Both follow what you report to the IRS, and Missouri subtracts the capital gain amount included in federal AGI starting with 2025 tax years as shown in House Bill 594.
Do corporations get the same Missouri benefit in 2025
- Not yet, because the corporate deduction is conditional on a future rate trigger and is not in effect for corporations for the 2025 tax year per Kutak Rock’s summary.
Does Missouri tax a 1031 exchange under the new law
- If your exchange defers gain federally there is no recognized gain that year to include in federal AGI, so Missouri has nothing to subtract, but any recognized boot is subtracted at the state level for individuals; see IRS Publication 544.
Will this change reduce my Kirkwood closing costs or property taxes
- No, because the subtraction only affects state income tax on gains and does not change local property taxes or standard closing fees, as noted in Ownwell’s Kirkwood overview.
When will Missouri update the MO‑1040 instructions for 2025 returns
- The Department of Revenue is expected to release updated forms and instructions for 2025, and advisors have flagged these upcoming changes in resources like Plante Moran’s state and local tax advisor.
