The Missouri Department of Revenue has further updated its 2018 income tax tables and released a revised 2018 withholding tax guide and withholding tables. The Department encourages employers to begin using the updated withholding tables as soon as possible to ensure that employees' income tax liabilities are met for the 2018 tax year. (State of Missouri employer's tax guide, updated October 2018; news release on updated income tax tables, September 2018.)

Supplemental Wages

As we previously reported, the 2018 supplemental rate of income tax withholding is 5.9%, down from 6%, due to Missouri legislation enacted in 2014 (SB 509) providing that the maximum state income tax rate would incrementally decrease by 0.1% each year for five years until the highest rate reaches 5.5%. (EY Payroll Newsflashes Vol. 19, #015, 1-16-2018 and #065, 3-22-2018.)

Missouri annual standard deduction increases for 2018, personal allowances eliminated

As we reported previously, the revised annual standard deduction amounts for 2018 are as follows:

• Single: $12,000 (up from $6,500)
• Married and spouse works: $12,000 (up from $6,500)
• Married and spouse does not work: (this is determined by the check box on Form MO W-4, Line 2, and is not a separate filing status): $24,000 (up from $13,000)
• Head of household: $18,000 (up from $9,550)

Note that the Missouri Department of Revenue is following federal law and, as a result, there are now no allowances. Previously, an allowance of $2,100 for single and married, and $3,500 for head of household, applied.

For the 2018 withholding tax formula, go to pages 16-17 of the tax guide.

Missouri top income tax and supplemental withholding rate decrease as of January 1, 2019 ?

As we previously reported, HB 2540 will decrease the maximum Missouri state personal income tax rate to 5.4% effective January 1, 2019, down from 5.9% for calendar year 2018. Accordingly, the supplemental rate of income tax withholding will also decrease to 5.4% for calendar year 2019. (Governor's press release; EY Payroll Newsflash Vol. 19, #119, 7-17-2018.)?

As announced by Missouri State Treasurer Eric Schmitt, the maximum rate was scheduled to decrease to 5.8% for calendar year 2019. HB 2540 reduces the scheduled maximum income tax rate by 0.4% for calendar year 2019, reducing the highest rate to 5.4%.??

Under HB 2540, the highest rate will be further reduced in 0.1% increments each year, if net general revenue collections meet certain triggers, until the highest rate reaches 5.1%.??

Personal and dependency exemptions eliminated, federal tax deduction limited?

• Personal and dependency exemptions. As we previously reported, personal and dependency exemptions have been eliminated. Prior to calendar year 2018, an individual could deduct $2,100 as a personal exemption, $2,100 for a spouse, and $1,200 for each dependent. HB 2540 codifies the provision that Missouri personal and dependency exemptions are not allowed if the federal exemption amount is zero.
• Federal tax deduction. Currently, individuals can deduct their federal income tax liability up to $5,000 or if a combined return, up to $10,000. Beginning January 1, 2019, HB 2540 phases out this deduction for individuals based on Missouri adjusted gross income limits. The deduction is allowed at 35% for incomes of $25,000 or less; 25% for incomes of $25,001 to $50,000; 15% for incomes of $50,001 to $100,000; and 5% for incomes of $100,001 to $125,000. The deduction is eliminated for incomes over $125,000.?

The Department typically releases the next year's withholding guide and tables before the beginning of the year. For more information on Missouri withholding tax, see the Department's website.??

———————————————

———————————————
ATTACHMENT

EY Payroll News Flash