Missouri HSA Tax Rules: A Declining Rate and a Rare Capital Gains Exemption

Missouri conforms to federal HSA tax treatment, with a rate that's gradually declining via a revenue-trigger mechanism -- and a genuinely unusual feature for its overall tax picture: it's one of the few states that doesn't tax capital gains at all.

Full conformity

Missouri follows federal HSA rules: contributions are deductible on the Missouri return, investment growth isn't state-taxed, and qualified withdrawals stay tax-free.

A rate that's declining via trigger, not schedule

Missouri's 2022 tax law (S.B. 3) ties further rate reductions to revenue triggers rather than a fixed legislated schedule -- the top rate dropped from 4.8% to 4.7% effective January 2025 once the relevant revenue condition was met. This is a similar mechanism in spirit to Georgia's and Michigan's rate-adjustment structures, though each state's specific trigger conditions differ.

A rare capital gains exemption

Separately from HSA treatment, Missouri is one of a small number of states that exempts capital gains income from state tax entirely -- most states tax capital gains as ordinary income. This doesn't change how HSA contributions or qualified withdrawals are treated, since those aren't capital gains in the first place, but it's a notable feature of Missouri's broader tax environment worth knowing if you're weighing where to hold other taxable investments.

Sources: Missouri Department of Revenue; Tax Foundation; IRS Publication 969 for federal HSA treatment.