1. Social Security Benefits Are Fully Exempt
Starting with the 2024 tax year, Missouri no longer taxes Social Security benefits for individuals aged 62 and older or those receiving disability benefits. This applies to the portion of Social Security included in your federal adjusted gross income. In short: 100% of Social Security benefits are now tax-free at the state level.
2. Public Pension Exemption
Missouri also provides relief for retirees receiving public pensions (such as from federal, state, or local government employment). You can deduct up to 100% of your public retirement benefits, limited to the maximum Social Security benefit amount. Importantly, the previous income-based eligibility limits were removed in 2024, making this benefit available to more retirees.
3. Private Pension and Retirement Account Deductions
For private pensions and retirement accounts (like IRAs and 401(k)s), Missouri offers a deduction—though it’s smaller than the public pension exemption. Eligible taxpayers can exclude up to $6,000 (or $8,000 if age 62 or older) from taxable income. Income thresholds apply for higher earners, so consult with a professional on your specific situation.
4. Declining State Income Tax Rate
Missouri is in the midst of a multi-year income tax reduction plan. The top individual income tax rate dropped from 5.4% to 4.95% in 2023, then to 4.7% in 2025, thanks to revenue triggers. These automatic cuts will continue until the rate reaches 4.5%, provided state revenue benchmarks are met.
5. Capital Gains Tax Exclusion
Missouri is the first state to fully exempt capital gains from taxation. Missouri House Bill 594 was signed into law in July of 2025. This provision allows Missouri taxpayers an exclusion for all capital gains reported on a federal (IRS) return. This applies to both short-term and long-term capital gains from the sale of assets in taxable investments accounts.
6. Additional Relief Programs: Local and County
- Senior Property Tax Freeze: Counties may allow eligible seniors to lock in their property tax amount, preventing future increases.
- Kansas City Earnings Tax: Does not apply to unearned income. For example, retirement account distributions are not subject to the Kansas City earnings tax.
If you have questions on your specific situation, schedule a consultation with Alex & Ashley