Missouri taxes for early retirees: capital gains are now tax-free, your IRA is not

By Tom, CPA · Updated October 29, 2026

TL;DR: Missouri's top 2026 rate is 4.7%, and it hits taxable income above about $9,400 regardless of filing status. Starting in 2025 individuals can subtract 100% of federally reported capital gains, and Social Security is fully exempt at 62. IRA, 401(k) and private pension income is taxed, apart from a small $6,000 private pension exemption for low incomes.

Educational only, not tax, legal, or investment advice. Examples are illustrations, not predictions. Rules and limits change; verify current figures and talk to a qualified professional about your situation.

Missouri did something in 2025 that made every FIRE spreadsheet in the state light up like a riverboat casino: it let individuals subtract 100% of federally reported capital gains from Missouri income. Sell index funds, pay zero Missouri income tax on the gain. Meanwhile, your traditional IRA is still taxed at rates that reach 4.7% before you've paid for a single toasted ravioli.

This guide covers the 2026 Missouri rules for early retirees: rates, the capital gains subtraction, Social Security and pensions, deductions, property tax, sales tax, estate tax, and residency. Starring Brokerage Bev, who has a taxable account the size of the Gateway Arch, and IRA Ian, who maxed out his 401(k) for 25 years and is starting to wonder why.

CPA Warning Label: Missouri's capital gains subtraction makes a brokerage account the cheapest place to live from, but your IRA withdrawals and Roth conversions still face the 4.7% top rate almost from the first dollar.

Income tax rates: eight brackets, all squeezed under $10,000

Missouri's brackets are so narrow that most retirees pay the top rate on most of their income. The 2026 brackets below come from the DOR's 2026 withholding formula (annual payroll column). The DOR publishes the final tax-year tables with the return, so confirm them on the 2026 MO-1040 when it's out.

The same brackets apply to every filing status, which means married couples don't get double-width brackets. The DOR confirms the 2025 individual rate was 4.7%.

Missouri's standard deduction tracks the federal one. The 2026 withholding formula uses $16,100 single, $24,150 head of household and $32,200 for a married couple, matching the federal 2026 amounts.

Capital gains: the 100% subtraction

Effective for tax year 2025, an individual can subtract 100% of the income reported as capital gain for federal purposes when figuring Missouri adjusted gross income. The DOR's FAQ describes it simply as 100% of federally reported capital gains, and you claim it on Form MO-A. Starting in 2026, a separate subtraction also covers capital gains on gold and silver specie.

What doesn't count: ordinary dividends, interest, IRA withdrawals and pension income. Qualified dividends are taxed at a lower federal rate, but they're dividends, not capital gains, so Missouri still taxes them. Capital gain distributions from mutual funds are reported as capital gains federally, so they should qualify; check your Form MO-A.

Illustration: IRA Ian and his wife, both 55, file jointly for 2026. Assumptions: $60,000 of traditional IRA withdrawals, $40,000 of long-term capital gains, standard deduction, no other Missouri adjustments. Federal AGI is $100,000. The capital gains subtraction removes $40,000, leaving Missouri AGI of $60,000. After the $32,200 standard deduction, Missouri taxable income is $27,800. Tax on the first $9,436 is $262.86 ($26.96 + $33.70 + $40.44 + $47.18 + $53.92 + $60.66). The remaining $18,364 at 4.7% is $863.11. Total: $1,125.97, using the 2026 withholding brackets. If those same $100,000 had been all capital gains, like Brokerage Bev's, Missouri taxable income would be $0. Ian has started referring to his 401(k) as "the mistake." It isn't, but we understand the feeling.

Social Security, pensions, IRAs and Roth conversions

• Social Security: For 2024 and later, Missouri doesn't tax Social Security benefits for people 62 or older, or Social Security disability benefits, to the extent they're in federal AGI. There's no longer an income limit. Benefits taken before 62 that aren't disability don't fit this rule, though few people get retirement benefits before 62.
• Public pensions: You can subtract public retirement benefits up to the maximum Social Security benefit for the year (the DOR posts the dollar figure; it's in the high $40,000s), with no income limit since 2024. The exemption is reduced by any Social Security deduction you claim.
• Private pensions, IRAs and 401(k)s: The private pension exemption is only $6,000, and it's fully available only if Missouri AGI is within $25,000 single, $32,000 married filing combined, or $16,000 married filing separately. It phases down as income rises above those limits. Most early retirees won't see much of it.
• Military retirement: Fully subtracted on Form MO-A since 2021.
• Roth conversions: Taxed as ordinary income, like any IRA distribution, because they're in federal AGI and no subtraction covers them.

Property tax and the senior credit

Missouri property taxes are local, set by counties, cities and school districts, and they vary a lot. The state's main relief for seniors is the Senior Property Tax Credit, which the DOR administers. 2025 legislation (HB 594 and HB 508) raised its income limits and credit amounts, added inflation adjustments and changed the credit formula, effective January 1, 2026. It's aimed at lower incomes, so check the current limits on the DOR's property tax credit page before you count on it.

Many Missouri counties also offer local senior tax freezes. Those are county programs, so ask your county collector what applies.

Sales tax and estate or inheritance tax

Missouri's state sales and use tax rate is 4.225%, and cities, counties and special districts add their own, so your total depends on where you shop. A 2025 law also exempted diapers, incontinence products and feminine hygiene products from state and local sales tax.

Missouri has no estate tax or inheritance tax. Only the federal estate tax could apply, at $15 million per person for 2026.

Residency and estimated payments

Missouri residents are taxed on all their income. If you move in or out mid-year, you'll file as a part-year resident and can allocate income. Missouri requires a declaration of estimated tax if you expect to owe $100 or more after withholding and credits, which is a low bar for early retirees living off IRA withdrawals with nothing withheld. The 2026 MO-1040ES has the vouchers and due dates.

Estimated payments are less of a worry if most of your spending comes from capital gains, since those may no longer generate Missouri tax at all.

Common Missouri mistakes early retirees make

• Assuming qualified dividends get the break. They're taxed at capital gains rates federally, but they aren't capital gains, so Missouri taxes them at up to 4.7%. A $1 million index portfolio yielding 1.5% throws off $15,000 of dividends a year, which is about $700 of Missouri tax at the top rate.
• Forgetting the subtraction is a claim, not an automatic. You have to file Form MO-A to get it. Tax software usually handles it, but check that the capital gain line actually flowed through.
• Counting on the private pension exemption. At $6,000, with full eligibility only at Missouri AGI of $32,000 or less for married filing combined, it's a rounding error for most early retirees.
• Collecting Social Security at 62 and assuming the IRS agrees. Missouri exempts benefits at 62 or older, but up to 85% can still be taxable federally. Our tax torpedo guide shows how IRA withdrawals make it worse.
• Skipping estimated payments. The $100 threshold is low. A $60,000 IRA withdrawal with no withholding easily clears it.

None of these is fatal, but together they can cost a few thousand dollars a year, which is real money even in a state where a nice house costs less than a parking space in San Francisco.

Planning moves for an early retiree in Missouri

• Fund early retirement from a taxable account. With capital gains subtracted, the brokerage account becomes Missouri's version of a Roth.
• Think twice about big Roth conversions while living here. Conversions hit the 4.7% rate almost immediately. If you plan to move to a no-income-tax state later, it might be cheaper to convert there; if you're staying, small annual conversions are taxed at the same 4.7% anyway, so the Missouri cost is mostly fixed.
• Rebalance with tax in mind. Selling appreciated funds is now state-tax-free, but the IRS still taxes the gain, so federal brackets still matter.
• Turn 62 before you collect. The Social Security exemption is tied to being 62 or older.

Comparing states? See Illinois, which exempts retirement income but taxes gains, Tennessee, and Colorado, then run your numbers in the state tax move calculator.