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SB 1138

SB 1138 - This act establishes the "Retaining MO Workers Act". For all tax years beginning on or after January 1, 2027, this act provides that the first $100,000 of income shall be subtracted from a taxpayer's federal adjusted gross income if the taxpayer is employed as any of the following: 1) a first responder, 2) a nurse, 3) a teacher, 4) a veteran of any branch of the Armed Forces of the United States, 5) any state or federal employee, excluding elected officials, 6) a laborer, 7) a commercial truck driver, 8) a nursing home employee, 9) a child care provider, or 10) a lineworker, as such terms are defined in the act. This act is substantially similar to SCS/SB 650 (2025). JOSH NORBERG

2026 Regular Session

Missouri SB 1138 creates a deduction from FAGI up to $100,000 for income earned as a qualifying employee (teachers, nurses, first responders, lineworkers, etc.) starting 2027.

Second Read and Referred S Economic and Workforce Development Committee
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Bill Summary · SB 1138

Summary of Missouri SB 1138 (2026)

Title and Purpose

  • Title: SB 1138 — Retaining MO Workers Act
  • Purpose: Establish a state income tax deduction aimed at retaining workers in designated professions by allowing a deduction from federal adjusted gross income (FAGI) for eligible income earned.

Key Provisions

  • Effective Tax Years: Beginning with tax years that start on or after January 1, 2027.
  • Tax Benefit: For qualifying taxpayers, the first $100,000 of income earned as a qualifying employee may be subtracted from FAGI.
  • Qualifying Employee vs. Non-Qualifying Income:
    • The deduction applies only to income earned as a “qualifying employee.” Income earned outside of this category does not receive the deduction.
  • Definition of Qualifying Employee (and related terms):
    • Child care provider: Defined as a licensed child care provider (per §210.221) or an unlicensed provider registered with the Department of Elementary and Secondary Education.
    • First responder: Includes a peace officer or patrol member (per §43.010), a federal law enforcement officer (per 34 U.S.C. §50301), a paid firefighter, or a paramedic/EMT.
    • Laborer: Broadly defined to include certain NAICS sectors (22; 31–33; 48–49; NAICS industry groups 8111, 8113; NAICS U.S. industry 813930).
    • Lineworker: Individual who installs, maintains, and repairs electrical power lines and related equipment.
    • Nurse: An individual licensed (per Missouri Chapter 335) and not a physician.
    • Nursing home employee: Any non-physician employee of a nursing home facility (as defined in §198.006).
    • Teacher: Employed at a public school, private school, or any public/private institution of higher education (per sections defining these terms).
    • Qualifying employee: An individual who is any of the following: first responder, nurse, teacher, veteran, state or federal employee (excluding elected officials), laborer, commercial motor vehicle driver, nursing home employee, child care provider, or lineworker.
    • Veteran: Any veteran of any branch of the U.S. Armed Forces.
    • State or federal employee: Includes employees of state or federal government, excluding elected officials.
    • Commercial truck driver: Driver of a commercial motor vehicle (per §302.700).
  • Interaction with Other Income:
    • The deduction applies only to income earned as a qualifying employee.
    • Income earned outside the qualifying categories is not deductible under this section.

Likely Impact

  • Targeted Retention: The policy is designed to increase retention of workers in specific high-need or essential occupations by providing a state-level tax benefit tied to FAGI.
  • Tax Benefit Size: The maximum deduction per qualifying taxpayer is $100,000 of FAGI related to qualifying employment.
  • Administrative Considerations: Jurisdiction will need to verify employment status and the applicable employment categories, and ensure proper calculation of FAGI deductions for tax year 2027 onward.

Affected Parties

  • Workers in Criteria: Individuals employed in the identified professions who earn income qualifying as “qualifying income” under the act.
  • Taxpayers: Missouri residents who file state income tax and have income in qualifying employment categories.
  • Employers in Affected Sectors: Employers in the applicable NAICS sectors and those employing lineworkers, nurses, teachers, etc., may benefit indirectly through improved retention.

Procedural and Timeline Aspects

  • Enactment: SB 1138 adds Section 143.126 to Chapter 143, establishing the new deduction.
  • Effective Date: Applies to tax years beginning on or after January 1, 2027.
  • Citation: The act is named and may be cited as the "Retaining MO Workers Act."

Notes

  • The bill is described as substantially similar to SCS/SB 650 (2025), indicating alignment with a prior version or companion measure.
  • The bill text provides detailed definitions for each term to ensure clear administrative implementation.

Compiled from official sources — confirm details with the bill’s official record.

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