State and Local Taxes If You Retire in Rhode Island

Rhode Island offers retirees some of the best Atlantic beaches in the country, and options from the larger cities of Providence and Newport to rural communities away from the coast. The climate is humid-continental with hot summers and cold winters with frequent snowstorms.

According to Top Retirements, median home prices are higher than in the rest of the country, but lower than in Boston, New York, or Connecticut. The cost of living index in Providence is 109 on a national index of 100. The state and local tax burden in Rhode Island is high compared to other states. According to the Tax Foundation Rhode Island ranked fifth in 2009, with an average state and local tax burden of 10.7% of income, compared to the national average of 9.8%.

Income tax

Rhode Island has a state income tax with progressive rates that effective in 2011 range from 3.75% up to 5.99%. According to the Rhode Island Division of Taxation, the top marginal rate was reduced from 9.90% to 5.99%, the tax brackets were expanded, and the use of itemized deductions was eliminated. The top rate of 5.99% applies on taxable income of over $125,000.

The standard deduction for the Rhode Island state income tax is $7,500 for single or married filing separately, $15,000 for married filing jointly and qualifying widow(er), and $11,250 for head of household. Personal and dependent exemption credits are $3,500.

Railroad retirement benefits are not subject to state income tax in Rhode Island. Social security retirement benefits are subject to state income tax to the same extent they are taxable for federal income tax purposes. Other types of pension and retirement income are generally taxable in Rhode Island. Capital gains are taxed as ordinary income for Rhode Island state income tax purposes.

Property taxes

Property taxes in Rhode Island are quite high compared to the rest of the country. According to the Tax Foundation, Rhode Island ranked fifth among the states in 2009 in terms of median property taxes paid of $3,618. And Rhode Island ranked twelfth in terms of taxes as a percentage of home value at 1.35%.

Property tax rates in Rhode Island vary across the state. You can find a list of municipal tax ratesin taxes per thousand dollars of assessed property value on the Rhode Island Department of Revenue website. There are property tax exemptions available that vary by city and town in Rhode Island. You can find a summary of the veterans’ and elderly tax exemptions based on a survey of the 39 cities and towns in Rhode Island on the Rhode Island Department of Revenue website.

In the City of Providenceveterans, homeowners age 65 or older or age 62 or older, who receive Social Security benefits, and homeowners who are 100% disabled or blind can claim property tax exemptions. Homeowners with total annual income of less than $25,000 can have their property taxes limited to a 5.5% increase over the prior year.

In the City of Pawtucketthere are property tax exemptions based on age, exemptions for homeowners who are handicapped or blind, and exemptions for veterans, disabled veterans, and veterans’ widows.

Residents of Rhode Island who rent or own their home and whose household income is not more than $30,000 can claim a tax credit. The credit is based on the amount of property taxes you paid directly or indirectly through rent. The maximum property tax credit is $300.

Sales tax

Rhode Island has a 7% state sales tax. Food, prescription medications, and some clothing are exempt from sales tax. You can find a list of taxable grocery items on the Rhode Island Division of Taxation website. There is also a 6% hotel tax on rooms in hotels, motels, or lodging houses.

According to the Rhode Island Division of Taxation, legislation enacted in 2011 broadens the sales tax to include nonprescription drugs. It also provides that if a federal law is enacted that requires remote sellers to collect and remit sales tax, the state sales tax of 7% would be reduced to 6.5%.


Exemptions by Definition, City of Providence Tax Assessor

The Facts on Rhode Island’s Tax Climate, Tax Foundation

Frequently Asked Questions Regarding 2011 Rhode Island Personal Income Tax Withholding and Revised Personal Income Tax Rates, Rhode Island Division of Taxation

Municipal Tax Rates, Rhode Island Department of Revenue

Property Taxes on Owner-Occupied Housing by State, 2004-2009, Tax Foundation

Rhode Island Resident Individual Income Tax Return, Rhode Island Division of Taxation

Rhode Island Retirement Guide, Top Retirements

Summary of Legislative Changes, Rhode Island Division of Taxation

Tax Assessor’s Frequently Asked Questions, City of Pawtucket Tax Assessor’s Office

Taxable Grocery Items, Rhode Island Division of Taxation

Veterans’ and Elderly Tax Exemption Programs in Rhode Island Cities and Towns, Rhode Island Department of Revenue

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