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Tax Year 2026Updated July 13, 2026

Does Missouri Tax Tips in 2026?

As of August 2026, Missouri has not issued official guidance on whether it recognizes the federal OBBBA tips deduction (IRC §224). Missouri generally conforms to the federal tax code, which suggests the deduction may apply – but the Missouri Department of Revenue has not confirmed this. Missouri's graduated income tax tops out at 4.7%, and workers in Kansas City and St. Louis also face a separate 1% local earnings tax that the federal deduction would not reduce.

How Missouri's Tips Tax Treatment Works

Missouri generally conforms to the Internal Revenue Code for its income tax starting point. This general conformity means that federal above-the-line deductions – including those that reduce federal AGI – typically flow through to Missouri's income tax calculation.

However, Missouri's conformity is not automatic for every provision. The state has its own graduated rate structure (recently simplified, with a top rate of 4.7% on income above $9,198) and has the authority to decouple from specific federal changes. Missouri recently made a major policy decision to fully exempt individual capital gains from state income tax (HB 594, effective 2025), demonstrating that the state actively manages its conformity choices.

The OBBBA tips deduction (IRC §224) is an above-the-line deduction that reduces federal AGI. Whether Missouri recognizes this deduction depends on how Missouri's conformity statute interacts with the new IRC section and whether the Missouri DOR or legislature takes action to decouple. As of August 2026, neither confirmation nor decoupling has been announced.

Federal Tips Deduction Quick Reference

DetailValue
IRC Section§224 (OBBBA)
Maximum deduction$25,000 tips
Deduction typeAbove-the-line (Schedule 1-A)
FICA still applies?Yes (Social Security 6.2% + Medicare 1.45%)
MFS eligible?No (MFJ or Single/HoH only)
Effective datesJan 1, 2025 – Dec 31, 2028
Missouri treatmentDoes not conform

Worked Examples Comparing Federal and Missouri Treatment

Example 1: Kansas City restaurant server (single filer, $36,000 income, $10,000 in tips)

Federal return:
Qualified tip income: $10,000
Tips deduction claimed: $10,000 (capped at $25,000)
Estimated federal tax savings: $1,200.00

Missouri return:
Missouri's treatment of the federal tips deduction is unknown. If Missouri recognizes the deduction, state savings would be approximately $470 ($10,000 at the 4.7% top marginal rate – nearly all of this income falls above the $9,198 threshold). If Missouri decouples, tips remain fully taxable. No Missouri DOR guidance has been issued as of August 2026.

Example 2: St. Louis casino dealer (single filer, $65,000 income, $25,000 in tips - federal cap reached)

Federal return:
Qualified tip income: $25,000
Tips deduction claimed: $25,000 (capped at $25,000)
Estimated federal tax savings: $5,500.00

Missouri return:
Missouri's treatment is unconfirmed. If the deduction applies, state savings would be approximately $1,175 ($25,000 × 4.7% top rate). If Missouri decouples, the full $25,000 in tips remains taxable at up to 4.7%. The federal savings of $5,500 apply regardless of Missouri's decision.

Missouri's Hospitality Industry and the Tips Question

Missouri has a substantial hospitality and tourism sector, particularly in Kansas City, St. Louis, Branson, and the Lake of the Ozarks region. Restaurant servers, hotel workers, casino employees, and entertainment venue staff across the state earn significant tip income. Kansas City's barbecue scene and St. Louis's dining culture employ thousands of tipped workers.

Local earnings taxes: Workers in Kansas City and St. Louis face an additional 1% earnings tax on top of the state income tax. These local taxes are separate from the state system and would not be affected by the OBBBA tips deduction even if Missouri conforms at the state level. This means a Kansas City or St. Louis tipped worker faces a combined state-plus-local rate of 5.7% on tip income (4.7% state + 1% local).

Missouri's Declining Rate and Policy Context

Missouri has been gradually reducing its top income tax rate as part of a multi-year reform. The rate dropped from 4.95% in 2024 to 4.8% in 2025 to 4.7% in 2026. Additionally, Missouri fully exempted individual capital gains from state income tax effective 2025 (HB 594). These policy choices show Missouri actively shaping its tax base, which means conformity with OBBBA cannot be assumed without explicit confirmation.

What to watch for: Missouri taxpayers should monitor the Missouri DOR website for Form MO-1040 instructions for tax year 2026 and any departmental bulletins. The Missouri General Assembly could also act during its sessions to clarify conformity. Until official guidance is published, taxpayers should consult a Missouri tax professional.

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Frequently Asked Questions

Does Missouri tax tips in 2026?
Missouri's treatment of the federal OBBBA tips deduction (IRC §224) is currently unknown. Missouri generally conforms to the federal tax code, which suggests the deduction could apply. However, the Missouri Department of Revenue has not issued specific guidance confirming whether the tips deduction is recognized for Missouri income tax purposes. As of August 2026, this remains an open question.
Does Missouri generally follow the federal tax code?
Missouri generally conforms to the Internal Revenue Code for its income tax starting point. However, Missouri has its own graduated rate structure with a top rate of 4.7% (reduced from 4.8% in 2025) and has the authority to decouple from specific federal provisions. Whether Missouri follows the OBBBA tips deduction depends on how the deduction interacts with Missouri's conformity framework.
What Missouri income tax rate applies to tip income?
Missouri uses a graduated system with many narrow brackets, topping out at 4.7% on income above $9,198 (same thresholds for all filing statuses). Because the lower brackets are very narrow (each spans roughly $1,314), most tipped workers' tip income falls entirely in the 4.7% top bracket. The first $1,314 of Missouri taxable income is taxed at 0%.
Do Kansas City and St. Louis earnings taxes apply to tips?
Kansas City and St. Louis each impose a 1% earnings tax on residents and those working within city limits. These local earnings taxes are separate from the state income tax and typically apply to all earned income including tips. The OBBBA tips deduction is a federal/state income tax provision and would not reduce local earnings tax obligations.
When will Missouri clarify its position on the tips deduction?
There is no announced timeline. Missouri taxpayers should monitor the Missouri Department of Revenue website (dor.mo.gov) for updated guidance, particularly Form MO-1040 instructions for tax year 2026 and any departmental bulletins addressing OBBBA provisions.
How does Missouri's ongoing rate reduction affect the tips question?
Missouri has been gradually reducing its top income tax rate (from 4.95% in 2024 to 4.8% in 2025 to 4.7% in 2026). Even as rates decline, the conformity question remains meaningful: a worker with $25,000 in tips would save $1,175 in Missouri taxes if the deduction applies at the current 4.7% rate. Further rate reductions in future years would decrease the state-level savings from any deduction.