Rhode Island State Tax Updates

Our Dash of SALT Blog provides the most recent developments and changes in state and local tax regulations. Here are the latest updates for Rhode Island.

December 17, 2025

Rhode Island Enacts Changes to Taxation of Short-Term Lodging Rentals Effective January 1, 2026

Authored by: Emilia Jarrin and Katie Nguyen, CPA

Beginning January 1, 2026, Rhode Island will implement two changes to the tax treatment of short-term lodging rentals, which include accommodations rented for 30 days or less. The local hotel tax applies to all short-term rentals, including hotels and rentals facilitated through platforms such as Airbnb and VRBO. Effective January 1, the short-term rental rate will increase from 1 percent to 2 percent. In addition, Rhode Island will introduce a new 5 percent tax on whole-home short-term rentals when an entire residential dwelling is rented, which is separate from the existing 5 percent state hotel tax that applies to single-room rentals. The applicable tax is determined based on the date of occupancy rather than the booking date. For reservations paid in advance at 2025 rates, any additional tax attributable to 2026 occupancy must be collected at checkout.

If you have questions about state excise taxes on rental property, please reach out to a member of the Withum SALT Team.

Rhode Island Decouples From Tax on Tips Exemption

October 6, 2025

Authored by: Kiana McGowan, CPA, MBA and Penny Sweeting

On October 2, 2025, the Rhode Island Division of Taxation issued Tax Advisory ADV-2025-20, announcing that the state will not conform to a key provision of the federal “One Big Beautiful Bill” (H.R. 1). Specifically, Rhode Island has chosen to decouple from the federal exemption that allows certain tip income to be excluded from taxable income.

While the federal law now permits qualifying tip income to be excluded from federal taxable income, Rhode Island taxpayers must continue to report and pay state income tax on all tip income received. The advisory clarifies that deductions and exclusions introduced under federal law, such as those for qualified overtime and tip income, must be added back when filing Rhode Island state tax returns for Tax Year 2025.

Taxpayers with Rhode Island-sourced income should be aware that, despite recent federal tax reforms, their state tax obligations remain unchanged with respect to tip income.

If you have questions about state personal income taxes, please reach out to a member of the Withum SALT Team.

August 4, 2025

Rhode Island Implements 2026 Budget With Major Tax and Policy Changes

Authored by: Emilia Jarrin and Penny Sweeting

On June 30, 2025, Rhode Island enacted its fiscal year 2026 budget bill, introducing broad tax increases and policy changes across various sectors. Key tax updates include raising the local hotel tax rate, introducing a new 5% tax on whole-home short-term rentals, increasing the real estate conveyance tax, and raising the motor fuel tax from $0.32 to $0.40 per gallon. The definition of net income for both corporate and individual taxpayers has expanded, and the scope of taxable tobacco products has broadened. The bill also imposes a new statewide property tax on non-owner-occupied residential properties over $1 million and adds parking services to the list of taxable transactions.

Additionally, several tax credits and deductions will sunset after January 1, 2026, including those for research and development, employment, and specialized investments. While others, such as the Qualified Jobs Incentive Act, the Tax Increment Financing program and the Wavemaker Fellowship, have been extended to the end of 2026. Other provisions include updated wage and reporting requirements for development projects, changes to the lead abatement tax credit certification, a revised hospital licensing fee structure, and repeal of the holiday business license requirement. Overall, the legislation reflects the state’s effort to modernize its tax base and revenue structure while phasing out aging incentive programs.

If you have questions about how state budget bills affect your business, please reach out to a member of the Withum SALT Team.

August 6, 2025

Rhode Island Fiscal Year 2026 Budget Includes Various Tax Increases

Authored by: Courtney Easterday, MSA and Jessie Racioppi, MSA

As of June 30, 2025, the Rhode Island fiscal year budget enacts various tax increases, imposes a new short-term rentals tax, and expands the definition of net income.

Local Hotel Tax Rate Increase: Effective January 1, 2026, the rate will increase to 2%.

Short-Term Rentals Tax Enacted: Effective January 1, 2026, there will be a 5% tax imposed on the total consideration for the short-term rental of houses, condominiums, and other residences. The short-term rentals tax will apply to whole-home rentals that the taxpayer entirely furnishes.

Real Estate Conveyance Tax Increase: Effective October 1, 2025, the real estate conveyance tax will increase to $3.75 for each $500 that is paid for the property or interest in a real estate company. There will also be an additional $3.75 for each $500 for the portion of consideration paid above $800,000.

Motor Fuel Tax Increase: Effective July 1, 2025, the rate will increase to $0.40 per gallon. Beginning July 1, 2027, the motor fuel tax rate will be adjusted for inflation for the two preceding years. The adjustment will be based on the inflation as of September 30 of the prior two years.

Updated Net Income Definition: Effective tax years beginning on or after January 1, 2025, “net income” for both corporate and individual purposes would include all income, deductions, or expenses that would be taxable for federal income tax purposes prior to the One Big Beautiful Bill Act.

For more details on the various tax changes as enacted by the budget, please visit: FY 2026 Budget | Office of Management and Budget.

If you have questions about state tax legislation, please reach out to a member of the Withum SALT Team.

March 25, 2025

Rhode Island Tax Changes Effective January 1, 2025

Authored by: Breea Boylan, CPA and Courtney Easterday, MSA

The Rhode Island Department of Revenue, Division of Taxation issued a summary of the tax changes that took effect on January 1, 2025 including:

Pass-through Entity Tax Credit Percentage – Decrease in the credit percentage that the individual receives for the tax paid by the entity from 100% to 90%.
Cannabis – Decoupling from IRC Sec. 280E Deduction Disallowance – RI now allows licensed cannabis businesses to claim deductions for business expenses disallowed federally by IRC 280E.
NOL Carryforward – Increase the number of years a business may use a NOL carryforward from 5 to 20 years.
Pension Income Modification Increase – This change increases the Pension and Annuity Income Modification from $20,000 to $50,000 (or $100,000 for filers married filing jointly). It does not change the qualifying income thresholds.

If you have questions about state statutory changes, please reach out to a member of the Withum SALT Team.

December 3, 2024

Rhode Island – Interest Rate Changes in 2025

Authored by: Katie Nguyen, CPA and Ryan Schupp

The Rhode Island Division of Taxation issued an advisory stating interest rate changes that will go into effect for the calendar year 2025. The interest rate for overpayments will decrease from 8.5% – 8% per year. However, the interest rate on delinquent payments will remain at 18% for trust fund taxes and 12% for other tax types. Trust fund taxes include sales tax, hotel tax, meals and beverage tax, and withholding tax. (Rhode Island Advisory No. 2024-27, 11/14/2024.)

If you have any questions about this update, please contact the Withum SALT Team.

Disclaimer: Please note this is the information that is readily available at this time, it is subject to change so please consult your Withum tax advisor.