Rhode Island's New Non-Owner Occupied Property Tax: Implications and Exemptions
Rhode Island has implemented a new Non-Owner Occupied Property Tax targeting residential properties valued above $1 million that are not used as primary residences. The tax, part of the state's Fiscal Year 2026 budget, applies to homes not occupied by the owner or a tenant for at least 183 days annually. Property owners will pay $2.50 for every $500 of assessed value above the initial $1 million, in addition to local property taxes. Revenue generated will support affordable housing development through Rhode Island's Low-Income Housing Tax Credit Fund.
As of May, Rhode Island identified 22,431 residential properties valued above $1 million, with 8,245 classified as non-owner-occupied and potentially subject to the new tax. Dubbed the "Taylor Swift tax" by local media due to the singer's Watch Hill mansion, the tax does not specifically mention her. Swift's property could face an additional annual tax bill of around $136,000 based on assessment records. Homeowners may qualify for exemptions if the property is rented long-term for over 183 days annually or operates as a registered short-term rental for more than half the year while paying state lodging taxes.
The Division of Taxation's earlier analysis estimated the tax would generate approximately $24.5 million in its first year, increasing to over $27 million by 2031 with improved compliance. Property owners subject to the tax can pay quarterly starting on Sept. 15 or pay the full amount in a lump sum by that date. Real estate groups have criticized the measure, expressing concerns about its impact on investment and property values. Michael Pereira, president of the Rhode Island Association of Realtors, highlighted the broader economic implications of the tax and potential challenges homeowners may face in proving exemption eligibility.