How to Calculate Missouri's Capital Gains Tax

When you sell an asset, the money that you make from the sale is considered a capital gain. You may already know that you'll need to pay a federal capital gains tax for that sale. The federal capital gains tax for most individuals with taxable incomes less than $80,000 is zero percent. While the cap for most individuals is ​15 percent​, it can go as high as ​37 percent​ in some cases. In addition to federal capital gains taxes, you should be thinking about capital gains taxes at the state level.

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If you make a capital gain in Missouri, there's an additional capital gains tax to pay under Missouri's tax law. The tax must be paid for the year that your capital gain was realized. In Missouri, there's no difference between long-term and short-term capital gains; this means that the length of time that you held an asset plays no role in determining how much you owe. However, the capital gains tax rate won't necessarily be the same for everyone.

Like many states, Missouri taxes capital gains like regular income. That means that the amount you pay in taxes on a gain will be determined by your tax bracket. Missouri actually has 10 different income tax brackets for the 2020-2021 filing season.

The various brackets for single, married filing jointly, married filing separately and head of household statuses are ​0 percent​, ​1.5 percent​, ​2 percent​, ​2.5 percent​, ​3 percent​, ​3.5 percent​, ​4 percent​, ​4.5 percent​, ​5 percent​ and ​5.4 percent​. Anyone in the state making more than ​$8,584​ will be taxed at the top rate of ​5.4 percent​. This rate is a decrease from the prior year's rate of ​5.9 percent​.

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Calculating your capital gains in Missouri is pretty straightforward once you determine your income tax bracket for the year. All gains that you've earned through the year will be added together as one to determine your total gain for the year. Let's use an example:

• 1. You make a total capital gain of ​$20,000​ in 2020.
• 1. Next, you will identify your tax rate. If you made at least ​$20,000​ in 2020, your rate is at the highest bracket of ​5.4 percent​. This rate means you'll pay a base amount of $279 and then 5.4 percent on whatever is over $8,584.
     
• 1. Next, subtract $8,584 from $20,000 to get ​$11,416​. You'll multiply this number by the Missouri capital gain/income tax rate and add ​$279​.
• 1. That will look like ​279 + (11,416 x .054) = $895.46​

Using this formula, you will owe ​$895.46​ in capital gains taxes in Missouri for the 2020 tax year. To find your actual amount, simply consult the tax table to get the base amount plus the tax rate that applies to the rest of your capital gain. You can the plug in the numbers to the formula. You can use the same process for figuring out your capital gains tax rate in most other states.

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In total, ​42 states and the District of Columbia​ all tax capital gains at the same rate as ordinary income. Only Arizona, Arkansas, Hawaii, Montana, New Mexico, North Dakota, South Carolina, Vermont and Wisconsin tax long-term capital gains at lower rates than ordinary income. A handful of other states like Colorado, Idaho, Louisiana, Oklahoma and Virginia offer breaks on capital gains taxes when investments are made in certain sectors. Always check with state tax laws to see if there could be ways to lower your capital gains taxes based on the type of asset you've sold.

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