Navigating the complexities of state taxes can be daunting, but understanding Rhode Island's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Ocean State's tax system, from income and sales taxes to property taxes and retirement benefits.
Rhode Island state tax: Overview
Property taxes in Rhode Island can be on the pricey side. Higher-than-average rates, combined with elevated home values, often lead to larger tax bills for homeowners.
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That said, there are some positives to note.
The sales tax rate is fairly reasonable, which helps keep everyday purchases more affordable. Income tax rates are also relatively low compared to many other states, particularly for individuals with higher earnings.
All in all, Rhode Island offers a mix of tax challenges and advantages, depending on your situation.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
Rhode Island income tax
Rhode Island has a graduated state individual income tax rate ranging from 3.75 percent to 5.99 percent.
Rhode Island retirement taxes
Rhode Island tax on retirement income: Military and Railroad Retirement benefits are tax-exempt. Social Security retirement benefits are exempt for retirees with a federal adjusted gross income (AGI) below the income thresholds set by the state.
Taxpayers who have reached full retirement age can exclude up to $20,000 of income ($40,000 for joint filers) from annuities and pensions (excluding IRAs).
- Tax on Taxable Income: Low of 3.75% (on up to $77,450) and a high of 5.99% (on more than $176,050)
- Social Security: Partially Taxable (Income requirements apply)
- Pensions: Partially Taxable
- 401(k) and IRA Distributions: 401(k) distributions (partially taxable) and IRA distributions (fully taxable)
Rhode Island sales tax
Rhode Island's state sales tax rate is 7%. Localities do not impose additional sales taxes, according to the Tax Foundation.
- Groceries: Exempt
- Clothing less: Exempt
- Prescription drugs: Exempt
How much are Rhode Island property taxes?
In Rhode Island, the average effective property tax rate is 1.05%, which can result in costly tax bills, especially considering the high home values in the state (when compared to other states).
Rhode Island Property Tax Breaks for Retirees
Cities and towns in Rhode Island can offer property tax credits to eligible homeowners. For example, South Kingstown offers a property tax credit of up to $2,472 to retirees age 65 and older that meet the following criteria.
- Homeowners must have owned and resided at a property in South Kingston for the past five years.
- Household income must fall below specified income limits to qualify.
Property tax credit amounts and criteria may vary from town to town. Retirees in Rhode Island should check with the jurisdiction where they live for more information about available tax credits.
Rhode Island gas tax
Gasoline | $0.33 per gallon |
Diesel | $0.33 per gallon |
Source: Sales Tax Handbook
Rhode Island taxes on alcohol and tobacco
Product | Tax Amount |
|---|---|
Cigarettes | $3.75 per pack |
Other Tobacco Products | 80% of wholesale price |
Medical Marijuana | 7% |
Source: Sales Tax Handbook
Product | Tax Amount |
|---|---|
Wine | $1.40 per gallon |
Beer | $0.10 per gallon |
Liquor | $5.40 per gallon |
Source: Sales Tax Handbook
Rhode Island estate and inheritance taxes
Rhode Island doesn't have an inheritance tax, but the state has an estate tax. Only estates valued at more than $1,802,431 are subject to the tax. Estate tax rates in Rhode Island range from 0.8% to 16%.
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