Real Estate Tax Calc
The critical distinction: St. Louis City vs. St. Louis County
One of the most important facts for St. Louis real estate investors to understand is that the City of St. Louis and St. Louis County are two entirely separate jurisdictions. The City of St. Louis is an independent city under Missouri law — it is not part of any county. When you buy investment property in the St. Louis metro area, whether your property is inside the city limits or in the county (or in one of St. Louis County’s many municipalities) determines which tax rules apply.
Properties within the City of St. Louis are subject to St. Louis City property taxes (levied by the city), St. Louis City earnings tax (1% on income earned in the city), Missouri state income tax (4.95%), and federal taxes. Properties in St. Louis County are subject to St. Louis County property taxes, the taxes of the specific municipality within the county (Chesterfield, Clayton, University City, etc.), Missouri state income tax (4.95%), and federal taxes — but NOT the St. Louis City 1% earnings tax.
This jurisdictional split significantly affects after-tax returns. A city property generating $10,000 in net rental income faces $545 in Missouri income tax plus $100 in city earnings tax = $645 in state-level tax. The same income from a county property faces only the $545 in Missouri income tax. Over a 10-year hold on a portfolio generating $50,000/year in net income, the earnings tax difference amounts to $5,000 in additional tax for city properties.
Missouri state income tax on rental income
Missouri taxes net rental income at a flat 4.95% state income tax rate as of 2023. Missouri enacted a series of income tax rate reductions through legislation in recent years, moving from a progressive rate structure to a flat tax. The 4.95% rate applies to all taxable income above modest exemptions.
Missouri conforms generally to federal treatment of rental income. Net rental income for Missouri purposes is gross rents minus all deductible expenses: mortgage interest, property taxes, insurance, depreciation, management fees, repairs, and other ordinary and necessary rental expenses. Missouri follows the federal 27.5-year MACRS depreciation schedule for residential rental property. Missouri does not require investors to add back federal bonus depreciation, and generally tracks federal depreciation elections.
Missouri residents report rental income on Form MO-1040 with the federal Schedule E attached as a reference. Non-resident investors with Missouri rental income must file a Missouri non-resident return (Form MO-1040) if their Missouri income exceeds the filing threshold.
St. Louis City earnings tax: how it applies to rental income
The City of St. Louis imposes a 1% earnings tax under city ordinance. The earnings tax applies to all income earned within the city’s boundaries, including wage income, business income, and income from rental property located within city limits. For rental property investors, the earnings tax is computed on net rental income from city properties at the 1% rate.
The earnings tax applies to the net rental income after expenses, not the gross rent. This means the same depreciation and expense deductions that reduce Missouri state income reduce the earnings tax base as well. If depreciation produces a rental loss for the year, there is generally no earnings tax for that property in that year.
The earnings tax is reported annually to the City of St. Louis Collector of Revenue. Out-of-state investors who own rental property in the City of St. Louis are required to file an earnings tax return for rental income from those properties. The tax is not withheld automatically — it is self-assessed and due on April 15 each year. Failure to file carries penalties and interest.
Property taxes in St. Louis City and County
Missouri law sets the assessment ratio for residential real property at 19% of appraised (market) value under Missouri Revised Statutes §137.115. This applies in both the City of St. Louis and St. Louis County. Commercial and industrial property is assessed at 32% of value; agricultural property at 12% of productive value. Most residential rental property (single-family, duplex, small multifamily) is classified as residential and assessed at 19%.
The key variable is the millage rate, which differs by location. St. Louis City has historically carried higher aggregate millage rates than suburban County areas, reflecting different school district funding levels, city services, and other taxing entities. As a rough illustration, effective property tax rates in the City of St. Louis for investment properties may range from approximately 1.8% to 2.5% of market value, while many St. Louis County municipalities see effective rates of 1.2% to 1.8%. These ranges are illustrative — actual rates vary by specific parcel, school district, and municipality. Always verify the current millage from the assessor’s records for a specific property.
Property taxes on rental properties are fully deductible on Schedule E as a business expense. The $10,000 SALT deduction cap does not apply to property taxes paid on rental property (it applies only to personal, non-business taxes). This makes the full property tax bill a dollar-for-dollar deduction that reduces both Missouri and federal taxable income.
Worked example: city vs. county after-tax comparison
Assume two comparable $250,000 investment properties: one in the City of St. Louis, one in a St. Louis County municipality. Both generate $18,000 per year in gross rents. Annual operating expenses (excluding mortgage, property tax, and depreciation) are $4,000 for each. Mortgage interest (year 1 on $200,000 at 7%): approximately $13,900. Depreciation ($250,000 × 80% building / 27.5): $7,273/year.
City property: Property tax estimate at 2.2% effective rate: $5,500/year. Net taxable income: $18,000 − $4,000 − $13,900 − $7,273 − $5,500 = -$12,673 loss. Missouri state tax: $0 (loss). City earnings tax: $0 (loss). If the investor can use the rental loss (AGI under $100,000 passive activity special allowance), the federal and state tax savings are significant.
County property: Property tax estimate at 1.5% effective rate: $3,750/year. Net taxable income: $18,000 − $4,000 − $13,900 − $7,273 − $3,750 = -$10,923 loss. Missouri state tax: $0 (loss). No earnings tax. The county property has a smaller paper loss — because its property tax deduction is smaller — but also has a lower actual property tax outlay by $1,750/year.
Capital gains and depreciation recapture at sale
Missouri taxes capital gains from real estate as ordinary income at the flat 4.95% state rate. There is no preferential long-term capital gains rate in Missouri. Depreciation recapture (the portion of the gain attributable to previously deducted depreciation) is also taxed at 4.95% for Missouri purposes.
Federally, long-term capital gains on real estate held more than 12 months are taxed at 0%, 15%, or 20% depending on income. Depreciation recapture on residential rental property is taxed federally at a maximum rate of 25% (unrecaptured Section 1250 gain). The 3.8% net investment income tax (NIIT) also applies federally for investors above the income threshold ($200,000 single / $250,000 married).
For a St. Louis City investor selling a property, the combined tax burden on a gain includes: federal long-term capital gains rate (15% or 20%), federal depreciation recapture at up to 25%, federal NIIT at 3.8% if applicable, Missouri income tax at 4.95%, and potentially the city earnings tax on the gain if the property is within the city and the gain is treated as earnings. The interaction between Missouri and city tax for capital gains on city properties should be confirmed with a Missouri tax advisor.
1031 exchange to move between city and county properties
A 1031 like-kind exchange is an effective strategy for St. Louis investors who want to move equity from the City of St. Louis (where the earnings tax applies) to St. Louis County (where it does not), without triggering current-year capital gains tax. Missouri conforms to the federal 1031 rules under IRC §1031. A qualifying exchange defers both federal and Missouri state capital gains. The replacement property must be identified within 45 days and acquired within 180 days.
Investors can also use a 1031 exchange to move from smaller city properties to larger county or suburban properties, increasing the portfolio quality while deferring tax. One common strategy: an investor holds several small city properties, sells them via 1031 into one larger suburban property, eliminating the earnings tax drag on the new property while consolidating management. The deferred gain is recognized on eventual taxable sale.
Common mistakes St. Louis investment property investors make
Failing to distinguish City from County jurisdictions. As described throughout this guide, the city/county split fundamentally changes the tax picture. Investors who see “St. Louis” and assume uniform taxes across the metro area consistently underestimate the cost of City properties.
Not filing the city earnings tax return. Out-of-state investors and even some Missouri residents with city rental properties fail to file earnings tax returns. The City of St. Louis tracks property ownership and may identify non-filers. Penalties and interest accrue on unfiled returns, and back-year earnings tax liability can be significant for long-held portfolios.
Using assessed value instead of market value for ROI calculations. Because Missouri assesses at 19% of market value, the assessed value shown on county records is a fraction of market value. Using assessed value as a proxy for market value understates the true purchase price and produces inflated ROI figures. Always model returns on the actual purchase price.
Frequently asked questions
Is there a St. Louis City earnings tax on rental income?
Yes. The City of St. Louis imposes a 1% earnings tax on income earned within city limits. For rental property owners, this tax applies to net rental income from properties located within the City of St. Louis. This is separate from the Missouri state income tax (4.95%) and applies only to income from properties inside the city limits, not properties in St. Louis County, which is a separate jurisdiction.
What is the property tax rate in St. Louis City vs. County?
Missouri law sets the assessment ratio for residential property at 19% of appraised value. Both City and County assess at 19%. However, the millage rates differ significantly. St. Louis City has historically carried higher total millage rates, producing effective rates that can be 1.8%–2.5% of market value for city properties vs. 1.2%–1.8% in many county areas, depending on the specific municipality and school district.
How are capital gains taxed in Missouri?
Missouri taxes capital gains from investment property as ordinary income at the flat 4.95% state income tax rate. There is no preferential capital gains rate in Missouri. Both short-term and long-term gains from real estate are subject to the same 4.95% rate, plus federal capital gains taxes at 0%, 15%, or 20% (plus 3.8% NIIT if applicable). Missouri depreciation recapture is also taxed at the ordinary 4.95% rate.
Should I buy investment property in St. Louis City or St. Louis County?
The choice involves tradeoffs. City properties typically offer lower acquisition prices and potentially higher gross yields, but face the 1% city earnings tax on rental income (an additional layer of tax not present in the county), higher property tax effective rates, and different market dynamics. County properties generally command higher prices but avoid the earnings tax and often have stronger rental demand from certain tenant profiles. Run after-tax numbers for both before deciding.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.