Gov. Mike Kehoe signs capital gains deduction, sales tax exemptions, and more into law

By Ray McCarty

Governor Mike Kehoe signs capital gains deduction 7/10/25

July 11, 2025 - Yesterday, AIM's president Ray McCarty and VP of Government Affairs Matthew Smith attended Gov. Mike Kehoe's signing ceremony for SS#2 HCS HBs 594 & 508. The law creates an individual income tax deduction for capital gains, clarifies equipment used to provide broadband service is exempt from sales and use taxes, provides new sales tax exemptions for diapers and feminine protection products, expands property tax relief programs for seniors, and allows emergency services districts that may now impose a local sales tax to also impose a local use tax.

"Allowing a deduction for capital gains will benefit many businesses, particularly family businesses looking to keep a business in the family," said Ray McCarty, president/CEO of Associated Industries of Missouri. "Transferring a business to a family member can create such a large tax liability that the business must be sold to pay the taxes. It is similar in that respect to the federal death (estate) tax. Any reduction in this tax liability could allow these businesses to remain in the family for the 90% of businesses that report their business income on their individual income tax returns."

Currently, machinery and equipment used to provide telecommunications services are exempt from state and local sales and use taxes. This bill clarifies that exemption also applies to machinery and equipment used to provide broadband services. Nearly all of this equipment is already exempt but this clarifies the exemption to prevent future misunderstandings in application of the exemption.

Associated Industries of Missouri applauds this tax cut and notes the capital gains deduction will also be available to corporations filing corporation income tax returns when the individual income tax rate is lowered to 4.5% at some point in the future.

"Congratulations to Governor Kehoe on achieving a key tax reform his first year in office," said McCarty.