State Guide 10 min read Updated June 2026

Rental Property Taxes in Rhode Island (2026 Guide)

Rhode Island is a small state with outsized landlord costs. Its income tax tops out at 5.99%, it makes you add back federal bonus depreciation, and — the trap most out-of-state owners miss — many RI cities tax non-owner-occupied rentals at a higher rate than owner-occupied homes and shut them out of the homestead break. Add a conveyance tax that jumped to $3.75 per $500 in late 2025 and the math matters. Here is what RI landlords need for 2026.

State Income Tax
Up to 5.99%
Rental Property Class
Higher than owner-occ
LLC Annual Fee
$50
Rent Control
None statewide

In This Guide

  1. 1. Property Tax: the Non-Owner-Occupied Penalty
  2. 2. State Income Tax (Top 5.99%)
  3. 3. Capital Gains (Taxed as Ordinary Income)
  4. 4. Bonus Depreciation Add-Back
  5. 5. Real Estate Conveyance Tax (Raised in 2025)
  6. 6. LLC Annual Report ($50)
  7. 7. Rent Control
  8. 8. Security Deposit Rules
  9. 9. How SheltrIQ Helps Rhode Island Landlords

1. Property Tax: the Non-Owner-Occupied Penalty

Rhode Island property tax is levied by each city and town, not the state, and statewide effective rates run roughly 1.3%–1.5% of value — among the highest in the country. But the rate you pay on a rental is often worse than the headline, because RI lets municipalities split residential property into occupancy-based classes (R.I. Gen. Laws 44-5).

Providence is the clearest example. Under R.I. Gen. Laws 44-5-11.18, the city may "divide Classes 1A and 1B into non-owner and owner-occupied property and adopt separate tax rates" in lieu of a homestead exemption — and it does:

  • Owner-occupied residential — the lower rate (Providence ~$10.46 per $1,000).
  • Non-owner-occupied (rentals) — a substantially higher rate (Providence ~$18.35 per $1,000), roughly 75% more for an identical building.

The penalty is two-sided: a rental sits in the higher non-owner-occupied class AND forfeits the owner-occupied homestead exemption that would otherwise cut the bill. Other RI cities use a homestead exemption your rental simply does not get. Always price a deal off the non-owner-occupied rate for that specific municipality, never the owner-occupied figure quoted to homebuyers.

2. State Income Tax (Top 5.99%)

Rhode Island has a graduated income tax of 3.75% / 4.75% / 5.99%, with a top marginal rate of 5.99%. Net rental income flows onto your RI-1040 and is taxed at these rates. SheltrIQ’s engine computes the exact liability across the brackets.

There is no separate, lower schedule for rental or investment income — it is all ordinary income to Rhode Island, which makes the deductions you capture (depreciation, repairs, mileage, professional fees) the main lever on your RI bill.

3. Capital Gains (Taxed as Ordinary Income)

Rhode Island gives capital gains no preferential rate — a long-term gain on a rental sale is taxed as ordinary income at the same 3.75%/4.75%/5.99% brackets, on top of federal capital-gains tax and any depreciation recapture. Unlike some neighbors, RI offers no special deduction or lower rate for long-held property, so disposition timing and a possible 1031 exchange carry real weight here.

4. Bonus Depreciation Add-Back

Rhode Island decouples from federal bonus depreciation under R.I. Gen. Laws 44-61-1 — the bonus depreciation allowed federally "shall not be allowed for Rhode Island tax purposes." You add the federal bonus back to RI income, then depreciate the asset over its regular schedule for state purposes.

In practice that means a permanent separate Rhode Island depreciation basis: you claim the bonus federally, reverse it for RI, and recover it over the normal recovery period so the two systems reconcile year to year. Mishandling this is one of the most common RI rental-return errors.

5. Real Estate Conveyance Tax (Raised in 2025)

Rhode Island’s transfer tax is the real estate conveyance tax under R.I. Gen. Laws 44-25-1, paid by the seller (grantor). The 2025 state budget raised it: effective October 1, 2025, the rate rose from $2.30 to $3.75 per $500 of consideration (about 0.75%) — up from the long-standing ~0.46%.

There is also a luxury surtax (the so-called "Taylor Swift tax"): an additional $3.75 per $500 on the portion of a residential sale price above $800,000, on top of the base rate. The $800,000 threshold is adjusted for inflation beginning in 2026. On a $1.2M rental sale, the conveyance tax now runs into five figures — budget for it when you model a disposition.

6. LLC Annual Report ($50)

A Rhode Island LLC must file an annual report with the Secretary of State (Form 632) and pay a $50 fee, due between February 1 and May 1 each year. Miss the deadline and a $25 late penalty applies; keep ignoring it and the state can revoke your good standing or administratively dissolve the LLC — which can pierce the liability protection you formed it for.

7. Rent Control

Rhode Island has no statewide rent control — you set rents at market and raise them freely on a month-to-month tenancy with proper notice. But RI is a tenant-protective state under the Residential Landlord and Tenant Act (R.I. Gen. Laws Ch. 34-18): a late fee cannot be charged until rent is more than 5 days late, and courts expect it to be reasonable. Know the chapter before you write your lease.

8. Security Deposit Rules

  • One month’s rent cap — the deposit may not exceed one month’s periodic rent (R.I. Gen. Laws 34-18-19).
  • Return within 20 days of the later of the tenancy ending, delivery of possession, or the tenant providing a forwarding address — with a written itemized statement of any deductions.
  • Stiff penalty — wrongfully withholding exposes you to twice the amount withheld plus the tenant’s attorney fees, so document condition and itemize carefully.

9. How SheltrIQ Helps Rhode Island Landlords

Rhode Island stacks a high income tax, a bonus add-back, and an occupancy-based property-tax penalty — SheltrIQ keeps the math straight:

  • Graduated income modeling — applies RI’s 3.75%/4.75%/5.99% schedule to your net rental income and rolls capital gains in at the same ordinary rates.
  • Bonus-depreciation tracking — flags the R.I. Gen. Laws 44-61 add-back and maintains a separate Rhode Island depreciation basis so federal and state reconcile.
  • Disposition modeling — accounts for the raised $3.75-per-$500 conveyance tax and the over-$800k luxury surtax when you project a sale.
  • AI Schedule E classification — sorts each expense to the right line so your RI return starts from an accurate federal one.

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