Missouri Subtractions: Understanding State Tax Deductions
Missouri allows taxpayers to subtract certain types of income from their federal adjusted gross income (AGI) when calculating their Missouri taxable income. These subtractions are part of the state’s method for aligning federal and state tax bases, ensuring that income exempt from Missouri state tax but included in federal AGI is properly excluded.
Key Missouri Subtractions
- Capital Gains: Missouri permits a 100% subtraction for federally reported capital gains. Taxpayers must enter the amount from Federal Form 1040 or 1040-SR, Line 7a, which must have been included in federal AGI. If the amount is negative, enter $0.
- Business Income: A 20% subtraction is allowed for Missouri-source business income, including combined profit by farmers. This applies only to income derived from Missouri sources and must be reported on Form MO-A, Line 16.
- Agricultural Disaster Relief Payments: These payments are also eligible for subtraction from federal AGI when included in federal income. They are reported on Form MO-A, Line 18.
How to Report Missouri Subtractions
Subtractions are reported on Form MO-A, Part 1, specifically on Lines 8 through 18. The total of these subtractions is entered on Form MO-A, Line 19, and then transferred to Form MO-1040, Line 4.
Taxpayers must ensure that the subtraction amount does not exceed the total Missouri subtraction modifications reported on Form MO-A, Line 19. For non-residents or part-year residents, adjustments may be required based on income sourced from other states.
Important Notes
- Subtractions apply only to Missouri-source income.
- Do not include income earned in other states on Line 18 of Form MO-A.
- Complete Form MO-NRI or Form MO-CR if you are a non-resident or part-year resident.
- Attach your Federal Form 1040 or 1040-SR along with any applicable schedules when claiming capital gains subtraction.
Source:
Form MO-1040 Instructions
Form MO-NRI
Disclaimer: Always verify details with the official Federal or State Department of Revenue Forms and Instructions.