If you’re a Rhode Island resident, you know that great things come in small packages, or in the case, small states. But there’s much more to Rhode Island other than its famously small geography. From expansive ocean views to breathtaking mansions in Newport, the Ocean State has a whole lot to offer.
To live along the coast of the Atlantic, though, you’ll certainly have to pay the price in state taxes. Whether you’re considering moving to Rhode Island or you’re simply preparing to file this year’s state taxes there, there are a few things you need to know in order to file in compliance with state tax regulations.
Our Rhode Island income tax calculator makes it easy for you to estimate your state income taxes, enabling you to plan your personal finances before tax season begins.
In this overview of Rhode Island state taxes, we’ll discuss a variety of taxes that impact Rhode Island taxpayers, including income taxes, property taxes, and sales taxes. The tax structure for each of these is determined by Rhode Island’s state government and organized by the Rhode Island Division of Taxation. This means that the state’s taxes are unique to Rhode Island, and do not apply to any other state in the U.S.
This is where the difference between state and federal taxes lies. State taxes are determined by individual state governments and only apply to taxpayers that reside or collect income within the state. Federal taxes on the other hand, are levied by the federal government, which means they apply to all taxpayers in the United States, no matter which state they live in. Federal taxes are collected by the Internal Revenue Service (IRS).
Rhode Island Taxes: Quick Facts
Income tax: 3.75 - 5.99%
Sales tax: 7%
Property tax: 1.35%
What does “state tax” mean in Rhode Island?
If you want to revel in coastal views and quaint New England charm offered by the Ocean State, you’ll certainly have to pay the price as a Rhode Island taxpayer. Rhode Island’s income tax rates may be fairly standard when compared to other states across the country, but its county property taxes are known to be some of the highest.
Want to know where you stand as a Rhode Island taxpayer? See quick facts about Rhode Island taxes below, or read through our complete guide to ensure you’re prepared to file your annual state taxes in accordance with Rhode Island state tax regulations.
Quick facts: Rhode Island state tax rates
Rhode Island state income tax rate: 3.75 - 5.99%
Rhode Island state sales tax rate: 7%
Rhode Island state property tax rate: 1.35%
Rhode Island Tax Brackets
Rhode Island uses a progressive tax system with three different tax brackets ranging from 3.75-5.99%. Each tax bracket corresponds to an income range. The range where your annual income falls is the rate at which you can expect your income to be taxed. In Rhode Island, the more you make, the more you’re taxed.
Self-employment taxes in Rhode Island
Self-employed taxpayers in Rhode Island will pay the same income taxes as all other taxpayers in the state. However, if your self-employment income exceeds the state’s threshold for estimated taxes, you may need to make tax payments throughout the year to fulfill your state tax liabilities.
In addition to state taxes, self-employed taxpayers should also be aware of their federal tax responsibilities. Anyone considered an independent contractor in the U.S. must pay self-employment taxes to account for their federal Social Security and Medicare dues. This tax is 15.3% of taxable self-employment income.
Rhode Island Personal Income Tax
Now that you know how Rhode Island state income taxes work, let’s find out where you fall into the Ocean State’s tax system. Using the table below, you can see which tax bracket you fall into based on your annual income. Many states also base their tax structure on filing status, but Rhode Island utilizes the same bracket system for all filing types.
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If you plan to sell a capital asset such as a business, piece of real estate property, or shares on the stock market, you’ll probably want to learn how capital gains taxes will impact you as a Rhode Island taxpayer.
Capital gains can be taxed at both the federal and state level. In Rhode Island, the highest rate for capital gains taxes is 6%, ranking it 16th highest in the nation.
Rhode Island State Sales Tax
The standard sales tax rate in Rhode Island is 7% on applicable goods and services. Rhode Island sales tax is collected by the vendor and remitted directly to the state’s Division of Taxation.
Depending on the product, you might notice that some items you buy in the state of Rhode Island are taxed higher or lower than others. However, unlike most other states, Rhode Island’s state-wide sales tax applies to all areas of the state, meaning that cities and counties don’t impose their own sales taxes on top of the 7% sales tax rate.
Rhode Island Excise Tax
What are excise taxes?
Remember when we mentioned that some items in Rhode Island are taxed at a higher rate than other products? This is generally known as an excise tax, which is essentially just an inflated tax on pre-determined products or services.
One common type of excise tax is “sin tax.” Sin taxes refer to taxes levied on products that the state deems harmful to the health and/or safety of their state. These taxes are often collected on alcohol, tobacco, and gambling profits.
Now that you know what excise and sin taxes are, let’s take a look at how they affect taxpayers in the Ocean State.
Alcohol excise tax in Rhode Island
Rhode Island, like many other states, levies an excise tax on alcohol distributed in the state. Each state has a different structure for how they impose taxes on alcohol, but most break it down into three categories: beer, wine, and liquor. Liquor is typically taxed the heaviest, ranging from an average of $0 to $32.52 per gallon in Washington.
Let’s see how much your mixology will cost you in the Ocean State:
Tobacco excise tax in Rhode Island
In addition to alcohol taxes, the state of Rhode Island also collects sin taxes on tobacco products, including cigarettes, chewing tobacco, and some tobacco accessories. Here’s what you can expect to pay in tobacco excise taxes in Rhode Island:
Cigarette Tax: $3.75 per pack
Other Tobacco Products: 80% of wholesale
Gas tax in Rhode Island
Another common example of state excise tax is the tax on gasoline. In Rhode Island, motor fuel is taxed at $0.34 per gallon. This rate increased by one cent in 2019; before that, the fuel tax rate had not been adjusted since 2015.
Rhode Island State Property Tax
As we discussed earlier, if you want to live amongst the East Coast’s finest seas and sights, you’ll have to consider the price of Rhode Island’s property taxes. Property taxes are typically levied by city and county governments since home values are often related to location. This means that some areas in the Ocean State will charge higher property taxes than others.
On average, Rhode Island property owners pay approximately $3,618 in property taxes per year, based on a median home value of $267,100—some of the highest property taxes in the country. Bristol County imposes the highest property taxes in the state, collecting an average of $4,477 per year, approximately 1.23% of the median home value in the area. Providence County on the other hand, collects the lowest property taxes in the state, an average of $3,380 per year, amounting to about 1.31% of the county’s median home price.
Inheritance and estate taxes are something of a controversial issue when it comes to state tax law. Some states levy them, while other states choose not to. Rhode Island does impose estate taxes on a scale of 0.8-16%, but does not levy inheritance taxes.
Inheritance and estate taxes are often confused because they both impact money and assets that are collected as a result of the death of an individual. Estate taxes are paid after debts have been settled with creditors, but before heirs have access to their inheritance. Inheritance taxes on the other hand, are to be paid by an heir after they have received their inheritance money.
Rhode Island State Tax Credits
If you’re feeling overwhelmed with your estimated Rhode Island tax dues, you’ll be happy to know that the Ocean State offers a number of tax incentives that can help save you money on your annual tax bill.
Tax credits are a way that states and the federal government encourage taxpayers to participate in government-supported initiatives such as education funding, adopting clean energy behaviors, and fostering community involvement. When you claim one of these tax credits, you’re able to get a dollar-for-dollar reduction in your tax bill—this is different from a tax deduction, which deducts the amount of your income you’re taxable for.
Want to save money on your Rhode Island tax bill? Here are some of the tax credits available to eligible taxpayers:
Apprenticeship Credit: If your Rhode Island offers apprenticeship opportunities to other Rhode Island residents, you may be eligible to claim a tax credit of up to $4,800 per employee.
Work Opportunity Tax Credit: To encourage Rhode Island business owners to diversify their hiring, the state offers a $9,000 tax credit for new long-term family assistance recipients that are hired over a two-year period.
Tax Credit for Contributions to Scholarship Organizations: If you’ve contributed to a Rhode Island scholarship fund over the last tax year, you may be eligible to claim a tax credit offered by the state.
Rhode Island State Tax Exemptions and Deductions
Tax deductions are similar to tax credits in that they help taxpayers save on their tax bill, but tax deductions reduce taxable income and directly impact a taxpayer’s overall tax bill by limiting the amount of your income that you’re taxable for. Deductions can help sway taxpayers into a different tax bracket with a lower tax rate.
There are two main types of tax deductions: the standard deduction and itemized deductions. Let’s take a look at how Rhode Island structures each.
The standard deduction is a tax incentive that’s available to most taxpayers, depending on their income. In other words, you don’t need any receipts or proof of donation in order to claim this deduction. The standard deduction that you’re eligible for relates to your income and filing status. See the table below to determine if you’re able to claim the standard deduction in Rhode Island.
Unfortunately for those looking to save, Rhode Island does not allow taxpayers to claim itemized deductions on their annual state tax return. Hey, we didn’t say Rhode Island was easy on its taxpayers, but the views, arts culture, and laid back coastal energy pay off, right?
The good news is that the federal government does offer a variety of itemized deductions as well as a standard deduction. Depending on how many itemized deductions you can claim, you may find that the standard deduction might end up saving you more money on your annual tax bill. To learn more about tax deductions, read our post to find out whether you should use the standard deduction or itemize your deductions.
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Depending on how much money you’ve contributed to your tax liability throughout the year, you might expect some money back from the state of Rhode Island after you file your annual tax return. This check is called a tax refund.
As a general rule, if you’ve instructed your employer to withhold a larger amount of your paychecks throughout the year to account for state taxes, you’re more likely to receive money back. Conversely, if you’ve requested them to withhold less money from your paychecks, you’re more likely to end up with a tax bill.
If you can’t wait until tax season is over to estimate your Rhode Island tax refund, head over to our Rhode Island tax calculator to see how much you can expect to pay in state taxes.
As you prepare to file your annual state and federal taxes, be sure to keep these best practices in mind to ensure that you’re following appropriate filing regulations.
When you receive your Form W-2 from your employer, be sure to confirm that all information displayed is correct, and alert your employer immediately if you find any errors.
If you’re self-employed, remember that you’ll need to make tax payments on your own since you do not have an employer withholding tax payments from your paychecks.
If you plan to claim any federal or state tax deductions, make sure to have supporting documents to prove that you’re eligible to claim the deduction.
How to Pay Rhode Island Taxes
If you find that you owe taxes to the Rhode Island Department of Revenue, then you’ll need to pay your balance after you’ve filed your state tax return. According to the Division of Taxation, the easiest way to pay your Rhode Island taxes is with a card payment online.
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Many states have quirky tax regulations or practices, and Rhode Island is no exception.
Summary of Federal Taxes
Congratulations, you know just about everything you need to know about how Rhode Island state taxes work! But let’s not forget, state taxes aren’t your only responsibility as an American taxpayer. In addition to your Rhode Island income, sales, and property taxes, you also need to consider your federal tax liabilities.
If you’ve reached your capacity for tax code knowledge, we’ll handle the rest of the heavy lifting. Head over to our federal tax calculator to easily estimate your federal income taxes. Here’s what you’ll need.
Your household income
Your filing status
Call us to stress less and save more on your federal tax refund.
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