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The Missouri Trusts Income Tax Exemption under HB 754 marks one of the most impactful changes in Missouri’s estate and trust law in decades. Starting January 1, 2026, qualifying resident irrevocable trusts and estates can avoid Missouri state income tax on non-Missouri-sourced income. For families and fiduciaries seeking to maximize wealth retention, HB 754 is a game-changer.
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Understanding HB 754 — Missouri’s New Trust Income Tax Law
Historically, Missouri taxed resident trusts on all income—regardless of where it was earned. HB 754 modernizes this by exempting non-Missouri-sourced income from Missouri state income tax for qualifying resident irrevocable trusts and estates. This aligns Missouri with trust-friendly states and keeps trust administration and professional services local.
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What Is a Resident Trust in Missouri?
A resident trust is typically a trust established under Missouri law or administered by a Missouri trustee. Under HB 754, only Missouri-sourced income remains subject to Missouri state tax. Income sourced to other states may be exempt—provided residency, sourcing, and documentation are handled correctly.
Key Changes Introduced by HB 754
| Previous Law | New Law (HB 754) |
|---|---|
| Resident trusts taxed on total income (regardless of source) | Resident trusts taxed only on Missouri-sourced income |
| Less competitive vs. trust-friendly states | Aligns MO with leading trust jurisdictions |
| Complex reporting for multi-state assets | Clearer distinction for sourcing in/out of MO |
Attorney-level overview: Husch Blackwell — Missouri Irrevocable Trusts Are Now State Tax-Free (Almost).
Ask Us If Your Trust Qualifies
Benefits of Missouri Trusts Income Tax Exemption for Residents
HB 754 can reduce state tax drag on out-of-state investments, improve after-tax compounding for multi-state portfolios, and give families confidence to keep trustees and courts in Missouri. For multi-generational planning, those incremental annual savings add up.
Reduced Tax Burden on Non-Missouri Income
Consider a Missouri resident trust that owns Florida rental property and a passive partnership interest in Colorado. Under HB 754, that income may be exempt from Missouri state tax, boosting net returns while keeping administration close to home.
Attracting High-Net-Worth Trust Holders to Missouri
By removing state tax on non-Missouri income, HB 754 positions Missouri alongside historically favored jurisdictions, reducing incentives to move trusts elsewhere solely for tax reasons.
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Implications for Estate Planning in Missouri
The Missouri Trusts Income Tax Exemption is more than a tax tweak—it affects trust situs, trustee selection, investment location, and distribution timing. Paired with Missouri’s recognition of modern estate-planning practices, families can design efficient, compliant plans aligned with values and timelines.
Coordinating with Trust Administration Updates
Recent fiduciary updates clarify how trustees allocate income vs. principal and exercise discretion. Those mechanics interact with how and when income is recognized and distributed—key considerations when applying HB 754.
Update Your Estate Plan for 2025–2026
How to Qualify for Missouri’s Trust Income Tax Exemption
Checklist:
- Your trust is a resident trust (or estate administered in Missouri).
- The trust earns non-Missouri-sourced income (e.g., rentals, partnerships, securities sourced outside MO).
- Documentation clearly proves income sourcing and apportionment.
- Annual fiduciary returns are filed with correct exemption treatment.
Residency and sourcing can be nuanced—especially with partnerships and apportionment. A proactive review now can prevent costly surprises later.
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What Types of Income Are Exempt?
Generally, non-Missouri-sourced income—income derived from property or activities outside Missouri—may be exempt at the state level for qualifying resident trusts and estates. Income sourced to Missouri (e.g., Missouri real estate or MO-based business activity) remains taxable. Federal tax treatment is unchanged by HB 754.
Potential Challenges and Misconceptions
- “All trust income is tax-free now.” — No. Only non-Missouri sourced income may be exempt.
- “We can skip Missouri fiduciary returns.” — No. Filing and documentation still matter.
- “Federal taxes are waived.” — No. HB 754 impacts state income tax only.
- “Residency and sourcing are obvious.” — Not always; facts and records control.
Speak with a Missouri Trusts Attorney
Why Consulting an Estate Planning Attorney Is Essential
Classification of income, residency, trustee duties, and multi-state portfolios can be complex. An experienced Missouri estate planning attorney helps you capture HB 754’s benefits while staying compliant.
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FAQs About Missouri Trusts Income Tax Exemption (HB 754)
1) When does HB 754 take effect?
It applies to taxable years beginning on or after January 1, 2026.
2) Does HB 754 apply to revocable living trusts?
The exemption is most relevant to irrevocable resident trusts and estates. Revocable living trusts (while the grantor is living) are generally disregarded for income tax, but your facts should be reviewed.
3) What counts as non-Missouri-sourced income?
Income from property, activities, or investments outside Missouri—such as out-of-state rentals, certain partnership interests, or business operations—may qualify. Sourcing rules are technical; documentation is key.
4) Will my federal taxes change because of HB 754?
No. HB 754 affects Missouri state income tax only; federal tax treatment is unchanged.
5) Can out-of-state families benefit from Missouri’s rule?
Potentially—if they establish a resident Missouri trust with appropriate administration, situs, and trustee arrangements.
6) What should trustees do before the 2026 tax year?
Complete an HB 754 readiness review: confirm residency, map income sources, update accounting practices, and coordinate with legal and tax advisors.
Book Your Free HB 754 Strategy Session
Conclusion: Secure Your Financial Legacy in Missouri
The Missouri Trusts Income Tax Exemption under HB 754 positions Missouri as a premier trust jurisdiction. By exempting qualifying non-Missouri-sourced income from state tax, families can preserve more wealth without moving administration out of state. Preparing now ensures you’re ready when the 2026 tax year arrives.
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