1031 Exchange in Missouri
Missouri conforms to federal 1031 rules, so a properly structured like-kind exchange defers Missouri income tax on the same 45-day / 180-day timeline as federal tax. Missouri computes state income starting from your federal adjusted gross income, and its individual income tax tops out at 4.7% for the 2025 tax year. Under House Bill 594 (2025), Missouri also enacted a 100% subtraction for capital gains reported for federal purposes by individuals — a change you should confirm for your specific tax year with the Department of Revenue. Missouri has no statewide real estate transfer or documentary-stamp tax and no 1031 clawback.
Fast Facts
- State Income Tax on Capital Gains
- Missouri computes income from federal AGI and taxes ordinary income at graduated rates topping out at 4.7% for the 2025 tax year. Under HB 594 (2025), individuals may subtract 100% of capital gains reported for federal purposes (claimed on Form MO-A). Confirm the effective tax year with the Missouri DOR.
- Conforms to Federal 1031
- Yes. Missouri begins from federal adjusted gross income (RSMo 143.121) and generally follows federal definitions (RSMo 143.091), so a valid federal 1031 deferral flows through to Missouri on the same timeline.
- Clawback Rule
- None. Missouri has no statute that recaptures 1031-deferred Missouri gain when you exchange into out-of-state replacement property.
- Non-Resident Withholding
- Missouri does not impose a dedicated withholding tax collected at closing on real property sales by nonresidents (unlike some states). Nonresidents still report Missouri-source gain on Form MO-1040 / MO-NRI to the extent gain is recognized.
- Transfer & Documentary Stamp Tax
- None statewide. Missouri's Constitution (Article X, Section 25, adopted 2010) bars new state or local real estate transfer/sales taxes. Standard county recording fees still apply; a limited number of localities may have pre-existing local transfer taxes.
Why Missouri Is Favorable for Exchanges
Missouri is a relatively low-friction state for a 1031 exchange, and it recently became more so. Two features stand out.
First, Missouri conforms to the federal like-kind exchange rules. Missouri’s income tax is built on top of your federal adjusted gross income (RSMo 143.121), and terms in the Missouri income tax code generally carry their federal meaning (RSMo 143.091). Because a valid Section 1031 exchange keeps the deferred gain out of your federal AGI, it is likewise deferred for Missouri — on the same 45-day identification and 180-day closing deadlines. There is no separate Missouri election or parallel state deadline to satisfy.
Second, Missouri does not have a 1031 clawback. Some states (Oregon and California, for example) track gain deferred on in-state property that is exchanged into out-of-state replacement property and recapture it later. Missouri has no such provision. Once gain is deferred federally, Missouri simply follows federal treatment when — and if — that gain is eventually recognized on a Missouri return.
On top of conformity, Missouri enacted a broad capital gains subtraction in 2025. Under House Bill 594, signed July 10, 2025, Missouri amended RSMo 143.121 to allow individuals to subtract 100% of income reported as a capital gain for federal income tax purposes when computing Missouri taxable income. This is significant for real estate investors: to the extent gain from a taxable sale (for example, boot in a partial exchange, or a fully taxable disposition) is reported as a capital gain federally, it may be fully subtracted on the Missouri individual return via Form MO-A. There has been some public confusion over exactly which tax year the individual subtraction first applies to — the enacting language references tax years beginning on or after January 1, 2025, while the Department of Revenue’s guidance addresses how and when it is claimed — so verify the effective year for your situation on the DOR’s Capital Gains Subtraction page before relying on it. (Note: the corporate version of the subtraction is contingent on Missouri’s top individual rate falling to 4.5% or lower and does not yet apply, because the 2025 top rate is 4.7%.)
Legal and Tax Considerations
State Income Tax on Capital Gains
Graduated rates topping out at 4.7% for 2025, computed from federal AGI. HB 594 (2025) adds a 100% individual capital gains subtraction claimed on Form MO-A — confirm the effective tax year with the DOR.
Conforms to Federal 1031
Yes. Missouri starts from federal AGI (RSMo 143.121) and follows federal definitions (RSMo 143.091), so federal 1031 deferral flows through on the same timeline.
Non-Resident Withholding
No dedicated real-property-sale withholding collected at closing. Nonresidents report Missouri-source gain to the extent it is recognized.
Transfer Tax
No statewide transfer or documentary-stamp tax; new transfer/sales taxes on real estate are prohibited by Missouri Constitution Article X, Section 25. County recording fees still apply.
Required Documentation
- Federal Form 8824 (Like-Kind Exchanges)
- Missouri Form MO-1040 (individual income tax return); nonresidents also file Form MO-NRI
- Missouri Form MO-A (Individual Income Tax Adjustments) if claiming the capital gains subtraction
- Qualified Intermediary exchange agreement and assignment documents
- Complete closing/settlement statements for both the relinquished and replacement properties
Clawback Rule
None
Official References
- RSMo 143.121 — Missouri adjusted gross income (incl. capital gains subtraction, as amended by HB 594)
- Missouri DOR — Capital Gains Subtraction (FAQ)
- Missouri DOR — Individual Income Tax (rates and year changes)
- House Bill 594 (2025) — full bill text
- Missouri Constitution, Article X, Section 25 — prohibition on new real estate transfer/sales taxes
- IRS Form 8824 — Like-Kind Exchanges
Missouri Tax Rate and Transfer Tax Context
Missouri does not apply a separate schedule to capital gains at the rate-table level; instead, income (including recognized gain) is computed from federal AGI and taxed under Missouri’s graduated individual income tax, which reaches a top marginal rate of 4.7% for the 2025 tax year according to the Department of Revenue. That top rate is comparatively modest, and Missouri has been reducing it in steps over recent years, with further reductions tied to revenue triggers. Because the individual capital gains subtraction enacted by HB 594 can remove capital-gain income from the Missouri base entirely for individuals, the state-tax cost of a fully taxable sale of long-held investment property may be substantially lower than the headline rate suggests. As always, the mechanics are claimed on Form MO-A, and you should confirm the applicable tax year and any eligibility conditions with the DOR.
On the transaction side, Missouri is light. There is no statewide real estate transfer tax and no documentary-stamp tax on deeds. In 2010, Missouri voters amended the state constitution (Article X, Section 25) to prohibit the state and its political subdivisions from imposing any new tax — including a sales tax — on the sale or transfer of homes or other real estate. The practical friction at closing is generally limited to standard county recording fees, though a small number of localities may have transfer taxes that predate the constitutional prohibition. The upshot: Missouri investors typically face far lower closing-side tax friction than investors in states with meaningful transfer or documentary-stamp taxes.
Step-by-Step Process
- 1
Engage a Qualified Intermediary Before Closing
For a delayed exchange, you must set up a Qualified Intermediary (QI) before you close on the relinquished Missouri property. You cannot take actual or constructive receipt of the sale proceeds — the QI holds the funds and facilitates the exchange under the federal safe harbor.
- 2
Sell the Relinquished Property
Close the sale of your relinquished property with the QI receiving the proceeds. Report the disposition on federal Form 8824, and keep complete settlement statements. Because Missouri conforms to federal treatment, no separate state 1031 election is required.
- 3
Identify Replacement Property Within 45 Days
You have 45 calendar days from the sale of the relinquished property to formally identify potential replacement property in writing, following the federal identification rules (such as the three-property rule or the 200% rule).
- 4
Close on Replacement Property Within 180 Days
You must acquire the replacement property within 180 calendar days of the sale (or your tax-return due date including extensions, if earlier). Under post-2017 federal law, only real property held for investment or business use qualifies.
- 5
Report Federal and Missouri Filings
Report the exchange on federal Form 8824 and carry the federal treatment through to your Missouri return (Form MO-1040; nonresidents also file Form MO-NRI). If any gain is recognized — such as boot in a partial exchange — check whether the HB 594 individual capital gains subtraction on Form MO-A applies for your tax year.
Timeline Calculator
Enter the closing date of your relinquished property to calculate your 1031 exchange deadlines:
Frequently Asked Questions
Yes. Missouri computes state income tax starting from your federal adjusted gross income (RSMo 143.121) and generally follows federal definitions (RSMo 143.091). Because a valid Section 1031 exchange keeps the deferred gain out of your federal AGI, that gain is also deferred for Missouri on the same 45-day identification and 180-day closing deadlines. There is no separate Missouri election or parallel state timeline.
No. Missouri has no statute that recaptures Missouri gain deferred in a 1031 exchange when you exchange into out-of-state replacement property. Unlike states such as Oregon or California, Missouri does not require ongoing tracking of deferred in-state gain. Missouri simply follows federal treatment when and if the gain is eventually recognized on a Missouri return.
Under House Bill 594 (2025), Missouri amended RSMo 143.121 to let individuals subtract 100% of income reported as a capital gain for federal purposes, claimed on Form MO-A. For a 1031 exchange, gain that stays deferred is not reported federally, so it is unaffected. But if you recognize gain — for example, boot in a partial exchange or a fully taxable sale — that recognized capital gain may be eligible for the subtraction. There has been public confusion over the exact first-eligible tax year, so confirm the effective year and eligibility on the Missouri Department of Revenue's Capital Gains Subtraction page.
Missouri taxes income computed from federal AGI at graduated rates that top out at 4.7% for the 2025 tax year. Any gain that is recognized — including boot in a partial exchange or gain from a failed exchange — enters the Missouri base at those rates, but individuals may be able to remove capital-gain income entirely via the HB 594 subtraction on Form MO-A. Check the current brackets and the subtraction rules with the Missouri DOR.
No. Missouri has no statewide real estate transfer tax and no documentary-stamp tax on deeds. Missouri's Constitution (Article X, Section 25, adopted in 2010) prohibits the state and local governments from imposing new transfer or sales taxes on real estate. Standard county recording fees still apply, and a limited number of localities may have transfer taxes that predate the constitutional prohibition.
Related Guides
- What Is a 1031 Exchange? — the complete federal framework, deadlines, and rules
- 1031 Exchange by State — compare Missouri with other states’ rules and clawback provisions
- Kansas City, MO
- Columbia, MO
- Jefferson City, MO
- Joplin, MO
- Cape Girardeau, MO
References
Official References
- RSMo 143.121 — Missouri adjusted gross income
- Missouri DOR — Capital Gains Subtraction (FAQ)
- Missouri DOR — Individual Income Tax
- House Bill 594 (2025) — full bill text
- Missouri Constitution, Article X, Section 25
- IRS Form 8824 — Like-Kind Exchanges
This information is for educational purposes only and is not legal or tax advice. Consult with qualified professionals regarding your specific situation.