Missouri taxes federal AGI at eight graduated rates topping out at 4.7%, after the federal standard deduction, which it adopts as its own. Neither federal deduction reduces Missouri tax. Missouri also lets you deduct part of the federal income tax you pay — 35% of it at low incomes, tapering to nothing above $125,000 — and because that deduction follows your federal bill, claiming the tips or overtime deduction shrinks it and raises your Missouri tax by a few dollars.
What it means on a real paycheck
Take a single filer earning $50,000 a year, $8,000 of it in tips. Against the same person with no tips to declare, the federal deduction is worth $960.
In Missouri it costs you $11 back, because the state lets you deduct the federal tax you pay and you are now paying less of it. You still come out $949 ahead, just by less than the headline suggests.
How Missouri works out the tax
Missouri charges nothing at all on the first $1,348, then 2% rising to 4.7%, after a standard deduction of $16,100 single or $32,200 filing jointly. It begins from your federal adjusted gross income and applies its own reliefs from there.