Missouri Announces 2018 Tax Year Changes

Changes to the following items will affect 2018 Missouri individual income tax returns:

– tax rates;

– personal exemptions;

– standard deductions;

– itemized deductions;

– business income deductions; and

– tax-free education savings plan distributions.

Tax Rates

Missouri has indexed the individual income tax brackets for inflation. In addition, the top rate has decreased because the state met its revenue target. (TAXDAY, 2018/07/16, S.10) Thus, for 2018, the rates are:

– If Missouri taxable income is $0-$102: $0

– $103-$1,028: 1.5% of Missouri taxable income

– $1,029-$2,056: $15 plus 2% of excess over $1,028

– $2,057-$3,084: $36 plus 2.5% of excess over $2,056

– $3,085-$4,113: $62 plus 3% of excess over $3,084

– $4,114-$5,141: $93 plus 3.5% of excess over $4,113

– $5,142-$6,169: $129 plus 4% of excess over $5,141

– $6,170-$7,197: $170 plus 4.5% of excess over $6,169

– $7,198-$8,225: $216 plus 5% of excess over $7,197

– $8,226-$9,253: $267 plus 5.5% of excess over $8,225

– Over $9,253: $324 plus 5.9% of excess over $9,253

Personal Exemptions

Due to changes in federal law, the 2018 Missouri exemption amounts are zero. (TAXDAY, 2018/07/13, S.14) These include:

– personal exemption;

– dependent exemption, including stillborn;

– additional personal exemption; and

– over age 65 dependent exemption.

Standard Deductions

Missouri bases its standard deduction on federal amounts. For 2018, the standard deduction amounts are:

– single: $12,000;

– married filing combined: $24,000;

– married filing separate: $12,000;

– head of household: $18,000; and

– qualified widow(er): $24,000.

Itemized Deductions

Missouri requires taxpayers to remove the same income tax deduction from federal itemized deductions to compute Missouri itemized deductions. Starting with the 2018 tax year, there is no longer an overall limitation on federal itemized deductions. However, the state tax deduction portion of federal itemized deductions is limited to $5,000 for married taxpayers filing separately, and $10,000 for all other taxpayers. Taxpayers with a state deduction greater than the $5,000 or $10,000 threshold amounts should complete the Net State Income Taxes worksheet located beneath the Missouri Itemized Deductions schedule on their tax return.

Business Income

Beginning with the 2018 tax year, Missouri allows a deduction for 5% of business income. Business income includes amounts reported on Schedule C and Schedule E of the federal income tax return. To calculate the deduction, taxpayers should complete the worksheet located on page 42 of the Form MO-1040 instructions. The deduction is a subtraction on the Form MO-A, Part 1, of the tax return.

Education Savings Plan Distributions

Missouri now allows tax-free distributions from Sec. 529 plans for elementary and secondary education expenses. (TAXDAY, 2018/06/12, S.10) This follows federal law changing the requirement that distributions be for higher education expenses.

2018 Individual Income Tax Year Changes, Missouri Department of Revenue, February 2019

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