With an override of Gov. Jay Nixon’s veto, the Missouri Legislature enacted legislation that provides for reductions in the maximum personal income tax rate, the phase-in of a personal income tax deduction for business income, and an increase in the personal exemption amount for certain taxpayers, beginning in 2017.
Maximum tax rate. Beginning with the 2017 calendar year, the top personal income tax rate (currently 6%) will be reduced by 0.1% for each year that the net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue in any one of the three fiscal years prior to such year by at least $150 million. The reduction in the top rate will be fully phased in when that rate is reduced to 5.5%. The tax brackets will also be adjusted annually for inflation.
Business income deduction. A personal income tax deduction for business income will be phased in over a period of years, beginning in 2017, if the net general revenue collected in the previous fiscal year exceeds the highest amount of net general revenue in any one of the three fiscal years prior to such fiscal year by at least $150 million. Provided that the revenue target is met, the deductible percentage will be 5% in 2017, and it will increase by 5% for each year that the revenue target is met until it is fully phased in at a maximum of 25% of business income. Shareholders of S corporations and partners in partnerships will be allowed a proportionate deduction based on their share of ownership of the business, as reported on their schedule K-1, or its successor form, for the tax period for which the deduction is being claimed.
Personal exemption amount. For tax years beginning on or after January 1, 2017, a resident taxpayer with Missouri adjusted gross income of less than $20,000 will be allowed an additional $500 personal exemption deduction (above the current $2,100 personal exemption amount) and an additional $500 deduction for his or her spouse, if the taxpayer is entitled to a personal exemption deduction for federal income tax purposes and his or her spouse’s Missouri adjusted gross income is less than $20,000. (S.B. 509, Laws 2014, effective August 28, 2014, and applicable as noted.)
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