Several tax changes took effect in Rhode Island on Jan. 1, including a new tax on whole-home short-term rentals and inflation adjustments to the estate tax threshold, the state Division of Taxation announced this week.
The changes affect short-term rental operators, homebuyers, estate planning and several business tax credits.
Short-term rentals
Owners of short-term rentals face two changes this year. The local hotel tax that applies to all short-term rentals, including hotels, doubled from 1% to 2%.
A new 5% whole-home short-term rental tax now applies to any residential dwelling rented in its entirety. The tax covers houses, condos, mobile homes and other residential dwellings, including vacation rentals and those offered through online hosting platforms such as Airbnb and VRBO.
Real estate conveyance tax
The Tier 2 threshold for the real estate conveyance tax increased to $824,000, up from $800,000. The threshold will now be adjusted annually based on the Consumer Price Index. The Tier 2 rate of $3.75 per $500 applies to residential property sales exceeding the threshold, in addition to the Tier 1 rate.
Estate tax
The Rhode Island estate tax threshold rose to $1,838,056 for decedents dying in 2026, up from $1,802,431 in 2025. The estate tax credit amount increased to $87,940 from $85,375.
Interest rates
Interest on tax overpayments dropped to 7.25% from 8%. Rates on underpayments remain at 18% for trust fund taxes and 12% for all other taxes.
Business tax credits
Several business tax credits were eliminated for tax years beginning Jan. 1, 2026, including the Jobs Growth Act Tax Credit, Specialized Investment Tax Credit and Employment Tax Credit. The Research and Development Expense Credit carryforward period increased from seven years to 15 years.
For more information, contact the Division of Taxation at 401-574-8829 or visit tax.ri.gov.