Capital Gains Subtraction FAQs

The capital gains subtraction, effective for the 2025 tax year, permits eligible individuals to subtract 100% of their federally reported capital gains from their federal adjusted gross income on their Missouri income tax return.

To qualify for the subtraction, you must be an individual subject to tax pursuant to section 143.011 RSMo, and you must have a reported capital gain.

The subtraction can be claimed by filing Form MO-A with your MO-1040 individual income tax return.

The subtraction applies to tax years beginning on or after January 1, 2026, and all subsequent tax years. You can first claim this on your 2026 individual income tax return, filed in 2027.

No., a fiduciary in not "an individual subject to tax pursuant to section 143.011", as required by legislation's change to Section 143.121, RSMo.

No. A pass-through entity (PTE) subject to PTE tax is neither "an individual subject to tax pursuant to section 143.011" nor are they "an entity subject to tax pursuant to section 143.071".

Not at this time. However, corporations can deduct 100% of capital gains from their federal taxable income after the top individual income tax rate in Missouri falls to 4.5% or lower. The corporate subtraction will take effect for all tax years beginning on or after January first of the tax year following the tax year in which this rate reduction occurs. For tax year 2025, the top individual income tax rate is 4.7%.

No. Capital losses do not qualify for the Missouri capital gains subtraction. The subtraction applies only to federally reported capital gains.

Capital losses allowed on the federal return are already accounted for in your federal adjusted gross income, which generally serves as the starting point of your Missouri return. The Missouri capital gains subtraction cannot be used to subtract capital losses.

For the 2025 tax year, the portion of income treated as capital gain for federal income tax purposes, and included in federal adjusted gross income, is the amount shown on line 7a of the federal form 1040. If one spouse has a capital gain while the other spouse has a capital loss, the amount from federal form 1040, line 7a will be entered on Form MO-A, line 18Y or line 18S only for the spouse that had the gain.

Example:

Combined capital gain reported on federal form 1040, line 7a: $10,000

• Primary taxpayer’s capital loss: $(5,000)
• Secondary taxpayer’s capital gain: $15,000
• Amount that should be entered on MO-A, line 18Y: $0
• Amount that should be entered on MO-A, line 18S: $10,000