Rhode Island · what’s new

What’s new in Rhode Island for 2026: bigger brackets, a federal law that passed the state by, and three headlines that wait until 2027

What changed on the Rhode Island return between the 2025 and 2026 tax years, and what did not. The inflation adjustments; why the federal deductions for tips, overtime, seniors and car loans do nothing here; the June 2026 budget and which of its changes reach the return you file in spring 2027 (fewer than the headlines suggest); the tax amnesty that opens in December; and the ballot. For anyone who files here.

By Charles Trautman, EA, editor

Need to Know Tax · written from Rhode Island Division of Taxation (Department of Revenue) sources, November 3, 2026; updated November 12, 2026 after the election · not yet reviewed by a Rhode Island practitioner

After the November 3, 2026 election. No tax question on the ballot. The big changes start in 2027: a $330 child credit and a surtax over $1 million. Rhode Island in 2027 and beyond →

The bottom line

The 2026 Rhode Island return is last year’s return with indexed numbers. None of the federal deductions for tips, overtime, seniors or car-loan interest reaches it.
The changes people have read about begin with tax year 2027: a refundable $330 credit per child, Social Security relief without an age test, and a 1% surtax on taxable income over $1,000,000 that rises to 2% in 2028 and 3% in 2029.
A tax amnesty runs December 3, 2026 through February 15, 2027 for periods ending by December 31, 2025: penalties waived and interest cut by 25%.
No tax question was on the November 3 ballot.

For most Rhode Island households the 2026 return will look like the 2025 return with slightly larger numbers on it. The brackets, the standard deduction, the exemption and the income level where both start to disappear all moved up with inflation, and that is the whole of the change on Form RI-1040 for a wage earner or a retiree. The federal tax law of July 2025 did not reach the Rhode Island return at all: the deductions for tips, overtime, seniors and car-loan interest come off after federal adjusted gross income, and the RI-1040 starts from federal AGI, so Rhode Island never sees them. The three changes people have read about, a $330 child tax credit, Social Security relief without an age test and a surtax on income over $1 million, were all enacted in June 2026 and all begin with tax year 2027. They are not on the return filed in spring 2027.

The Rhode Island Division of Taxation published the 2026 figures in Advisory 2025-22 on November 3, 2025, set out its position on the federal law in Advisory 2025-20, and summarized the June 2026 budget in a July 2026 legislative summary. Those three documents are the sources for nearly everything below.

The inflation adjustments

Rhode Island indexes its brackets, its standard deduction, its exemption and the phase-out range every year, and the Division publishes them each November. For 2026 the changes are these.

Rhode Island indexed figures, 2025 and 2026
Item	2025	2026
Top of the 3.75% bracket	$79,900	$82,050
Top of the 4.75% bracket	$181,650	$186,450
Standard deduction, single or married filing separately	$10,900	$11,200
Standard deduction, married filing jointly or qualifying surviving spouse	$21,800	$22,400
Standard deduction, head of household	$16,350	$16,800
Exemption, per person	$5,100	$5,250
Phase-out of deduction and exemptions begins (modified federal AGI)	$254,250	$261,000
Phase-out step	$7,250	$7,450
Deduction and exemptions gone above	$283,250	$290,800

Rhode Island uses one bracket schedule for every filing status. The 2025 figures are from the Division’s 2025 rate schedule and worksheets; the 2026 figures are from Advisory 2025-22.

The rates themselves did not move: 3.75%, 4.75% and 5.99%. A couple whose income did not change will pay a little less Rhode Island tax for 2026 than for 2025, because more of it falls in the lower bracket and more of it is sheltered by the deduction and exemptions. The withholding tables for 2026 were updated to match, so most wage earners already saw the difference in their paychecks during the year.

The federal law of 2025, and why Rhode Island did not follow it

The federal tax law signed July 4, 2025 created deductions for tips, overtime pay and car-loan interest, added a $6,000 deduction for people 65 and older, raised the standard deduction and lifted the cap on the state and local tax deduction to $40,000. Every one of those is taken after adjusted gross income on the federal return. Form RI-1040 begins with federal AGI, line 11 of the Form 1040, and works from there with Rhode Island’s own deduction and exemptions. Nothing below the federal AGI line ever arrives.

The Division said as much in Advisory 2025-20, dated October 2, 2025: tips, overtime and car-loan interest are below-the-line items that are not reflected in federal AGI, and Rhode Island will not allow those exclusions. No add-back is needed, because the income never left. A restaurant server who owes no federal tax on $12,000 of tips still owes Rhode Island 3.75% of them, $450. A worker whose $5,000 of overtime is federally deductible still pays Rhode Island on it. A 70-year-old’s $6,000 senior deduction saves federal tax and nothing else; Rhode Island’s own relief for older taxpayers is the Social Security and pension modifications on Schedule M, which have their own tests (see Rhode Island for retirees).

The higher SALT cap is irrelevant for the same reason, with one twist. There is no itemizing on the RI-1040, so property taxes and mortgage interest were never deductible here and the cap never mattered. Rhode Island does keep its pass-through entity election, under which a partnership or S corporation pays 5.99% at the entity level and the owners take a credit; it exists to work around the federal cap, and owners who use it must make the add-back on the RI-1040.

Where the state did act: business write-offs. The parts of the federal law that do reach federal AGI are the business provisions, and Rhode Island decoupled from them. The state budget enacted in June 2025 kept Rhode Island out of the federal changes for tax year 2025, and the Division’s emergency regulation of December 15, 2025 and Advisory 2025-20 set up RI Schedule HR1-Individual for the add-backs: the larger depreciation write-offs, the looser business interest limit under Section 163(j), and immediate research expensing under Section 174A, with amounts flowing to Schedule M. The June 2026 budget made the decoupling permanent on a staggered schedule: Section 174A from tax year 2026, Sections 163(j) and 1202 from tax year 2027. Rhode Island has long required federal bonus depreciation to be added back and recovered over the asset’s life. Whether the 2025 add-back of the increased Section 179 limit continues for 2026 has not been stated by the Division (verify). A sole proprietor, landlord or farmer who expensed equipment federally in 2026 should expect a Rhode Island add-back and should keep the federal depreciation schedule handy.

The June 2026 budget: what starts in 2027

Governor McKee signed the fiscal 2027 budget, 2026-H 7127 Substitute A, on June 12, 2026. Article 6 is the tax article, and it made more news than any Rhode Island tax bill in years. Three of its changes are the ones people ask about, and all three apply to tax years beginning on or after January 1, 2027. The return you file in spring 2027 covers 2026. None of them is on it.

Article 6 changes to the personal income tax, by the year they start
Change	What it does	First return it appears on
Rhode Island child tax credit	$330 per child age 18 or under at year end, fully refundable, for residents. Phases out above federal AGI of $88,500 (single, head of household, married separate, qualifying surviving spouse) or $110,640 (married joint), losing 20 percentage points for each $2,875 or $3,590 over the line. Indexed from a 2026 base.	Tax year 2027, filed in 2028
Social Security modification without the age test	The requirement that you have reached full Social Security retirement age is removed. The income limit stays: $80,000 single, head of household or married separate and $100,000 joint in the statute, indexed each year ($107,000 and $133,750 for 2025).	Tax year 2027. For 2026 the age test still applies.
High-income surtax	1% on Rhode Island taxable income over $1,000,000, making the top rate 6.99%. Rises to 2% for 2028 and 3% for 2029 and after, the threshold indexed. Trusts and estates: the same rates above $36,427.	Tax year 2027. Withholding tables and estimated vouchers change for 2027.
Section 174A decoupling made permanent	Research expenses deducted immediately under federal law are added back on the Rhode Island return and recovered over time.	Tax year 2026
Sections 163(j) and 1202 decoupling made permanent	Business interest limit add-back; the expanded federal exclusion for qualified small business stock is added back.	Tax year 2027

Source: the Division’s July 2026 summary of legislative changes and the enacted text of Article 6. A founder planning to sell qualified small business stock should note the date: a 2026 sale is under the old rule.

The child tax credit is the one most likely to be claimed by mistake. Tax software for the 2026 return will not have a line for it, because there is none; a family that read about “$330 per child” in June 2026 will see it for the first time on the return filed in early 2028. The same goes for a 62-year-old retiree who heard that Rhode Island stopped taxing Social Security. For 2026, the modification still requires full retirement age, 66 to 67 depending on birth year, and federal AGI under the limit. The age test comes off for 2027.

The tax amnesty: December 3, 2026 to February 15, 2027

Article 6 also created the Rhode Island Tax Amnesty Act of 2026, the state’s first amnesty in nearly a decade. For 75 days, from December 3, 2026 through February 15, 2027, anyone who owes Rhode Island tax for a period ending on or before December 31, 2025 can file the missing returns, pay the tax, and have every penalty waived and the interest cut by 25%. The Division also agrees not to pursue civil or criminal prosecution for the periods covered. It covers every tax the state imposes, including personal income tax, and it extends to periods already under a notice of deficiency. Taxpayers under criminal investigation or in a pending fraud case are excluded. Payment in full is due with the application; a taxpayer who shows hardship may be allowed an installment agreement on the Division’s terms, and a missed installment makes the whole balance due at once.

For a non-filer with several years of unfiled RI-1040s, this is the cheapest the back years will ever be. The federal side is not included; the IRS has no amnesty. But a taxpayer catching up on both at once will find the Rhode Island half considerably less painful if it is done inside the window.

Worked example: a 2023 return filed under amnesty

A self-employed painter never filed his 2023 Rhode Island return. The tax would have been $4,000, due April 15, 2024. He files and pays in January 2027, about 33 months late. Rhode Island’s late-filing penalty is 5% a month to a maximum of 25%, the late-payment penalty is one-half of 1% a month to a maximum of 25%, and interest on unpaid personal income tax runs at 12% a year (verify penalty terms).

	Without amnesty	Under amnesty
2023 tax	$4,000	$4,000
Late-filing penalty, capped at 25%	$1,000	$0
Late-payment penalty, 0.5% × 33 months, capped at 25%	$660	$0
Interest, 12% a year for 33 months	$1,320	$990 (25% off)
Paid	$6,980	$4,990

The $1,990 saved is on one year. A non-filer with three or four open years saves several times that, and the Division’s promise not to prosecute is worth more than the money. Interest is simple, not compounded, in this illustration; the Division’s own figures will govern (verify).

The smaller changes that do take effect in 2026

Short-term rentals. From January 1, 2026, a whole house or condo rented through a platform carries a new 5% whole-home short-term rental tax on the total rental charge, and the local hotel tax on all short-term rentals rose from 1% to 2%. These are collected from the guest and remitted; they are not income tax items, but anyone renting a summer place should know they exist.

Estate tax. For deaths in 2026 the Rhode Island estate tax threshold is $1,838,056 (a credit of $87,940), up from $1,802,431. A net taxable estate at or below the threshold owes nothing. There is no inheritance tax and no gift tax.

Interest rates. Interest the Division pays on refunds fell to 7.25% for 2026, from 8%. Interest on underpayments stays at 12%, and at 18% for trust-fund taxes such as sales tax and withholding.

Information returns. Rhode Island used to require a copy of any 1099 reporting $100 or more. From June 23, 2026 the state thresholds match the federal ones form by form, so a payer that must send the IRS a 1099 sends the Division the same one and no others.

Ghost preparers. A law effective June 19, 2026 lets the Tax Administrator fine a preparer up to $1,000 per return for willfully misleading a taxpayer, fraud or circumventing state tax law, up to $5,000 for continuing to prepare returns after a revocation or suspension, and publish a list of sanctioned preparers. If the person who prepares your return will not sign it, that is now a reportable matter in Rhode Island as well as federally.

Non-owner-occupied homes over $1 million. A statewide tax on residential property that is not the owner’s primary residence and is assessed above $1 million took effect July 1, 2026, at $2.50 per $500 of assessed value above $1 million, with homes rented at least 183 days a year excluded. It is a property tax, billed outside the income tax system, and does not appear on the RI-1040.

The ballot

There was no income tax question, and no tax question of any kind, on the November 3, 2026 ballot. The five statewide questions were general-obligation bond authorizations totaling $550 million. Nothing voted on in November changes the 2026 return.

What this means for the 2026 return

Wage earners: the brackets, deduction and exemption are larger. Tips and overtime are taxed in full.
Retirees: no change. Social Security and pensions still come off only at full retirement age and under the income limit, which for 2026 had not been published as of this writing (2025: $107,000 single, $133,750 joint). IRA withdrawals are taxed at any age. The federal senior deduction does nothing here.
Families: each dependent is a $5,250 exemption. The $330 child tax credit is for 2027; there is no Rhode Island child credit on the 2026 return. The state earned income credit is unchanged at 16% of the federal credit.
High earners: the deduction and exemptions phase out from $261,000 to $290,800 of modified federal AGI. The 1% surtax does not apply to 2026 income.
Business owners, landlords and farmers: expect add-backs on Schedule HR1-Individual and Schedule M for research expensing and, likely, for depreciation taken under the 2025 federal law (verify).
Non-filers: the amnesty window is open from December 3, 2026 to February 15, 2027 for 2025 and earlier.
Estates: the threshold is $1,838,056 for deaths in 2026.

Behind the scenes: why the headlines are a year early

Rhode Island’s General Assembly writes its tax changes into the annual budget, which passes in June and takes effect July 1. A change to the personal income tax enacted in June cannot sensibly apply to the calendar year already half over, because withholding tables, estimated-payment vouchers and software have been set since January. So the standard drafting is “tax years beginning on or after January 1” of the following year. The child credit, the Social Security change and the surtax all carry that language, and all land on 2027 income. The amnesty is the exception: it is a collection program, not a change to the tax, so it could open six months after passage.

The decoupling story runs the other way. Because the RI-1040 starts from federal AGI and Rhode Island conforms to the federal code on a rolling basis, the business provisions of the federal law would have flowed into Rhode Island income automatically and cost the state money in a year already budgeted. The June 2025 budget cut them off for 2025 by defining Rhode Island income as what it would have been before the federal act; the Division then had to build Schedule HR1 in the fall to make that work on a return. The June 2026 budget replaced the stopgap with permanent, section-by-section rules. The below-the-line items never needed any of this: they never entered the Rhode Island base, so the state kept the revenue without a vote.

What to bring

Last year’s RI-1040, to compare line by line; the form is the same, the figures are larger
For a tipped or hourly worker: the W-2 showing tips and overtime, which Rhode Island taxes in full
For anyone 65 or older: dates of birth for both spouses, since the Social Security and pension modifications still turn on full retirement age for 2026
For a business, farm or rental: the federal Form 4562 and any Section 174A research expensing, so the Rhode Island add-backs can be figured on Schedule HR1-Individual
For an S corporation or partnership owner: the Rhode Island K-1, including any pass-through entity tax paid on your behalf
For a non-filer: every open year’s records, so the amnesty application can be filed before February 15, 2027
For anyone renting out a house or condo: the platform’s statement of short-term rental taxes collected

Questions people ask

Did Rhode Island pass “no tax on tips”?

No. The Division said in October 2025 that the federal tips, overtime and car-loan deductions do not reduce Rhode Island tax. They come off after federal AGI, and the RI-1040 starts from federal AGI, so the income is still there. No add-back is needed; nothing was taken out.

Do I get the $330 child tax credit on the return I file in 2027?

No. The credit applies to tax years beginning on or after January 1, 2027. The return filed in spring 2027 is for 2026, and the only child-related item on it is the $5,250 exemption for each dependent. The first return with the credit is the 2027 return, filed in early 2028.

I am 63 and retired. Is my Social Security now exempt in Rhode Island?

Not for 2026. The modification still requires that you have reached full Social Security retirement age and that your federal AGI is under the limit. The age test is removed for tax years beginning in 2027. The income test stays.

Does the new 1% surtax apply to my 2026 income?

No. It applies to Rhode Island taxable income over $1 million for tax years beginning in 2027, at 1%, rising to 2% for 2028 and 3% for 2029. The top rate for 2026 is 5.99%.

I have not filed Rhode Island returns for several years. What is the amnesty worth?

Every penalty waived, interest cut by 25%, and no prosecution for the periods you disclose, provided you file and pay in full (or qualify for a hardship installment plan) between December 3, 2026 and February 15, 2027. It covers periods ending on or before December 31, 2025. It does not cover the IRS.

I took 100% bonus depreciation on equipment for my Schedule C. Does Rhode Island allow it?

Expect an add-back. Rhode Island has not followed federal bonus depreciation and requires it to be added back and recovered over the asset’s life; for 2025 the Division also required add-backs of the 2025 federal law’s business changes on Schedule HR1-Individual. Watch the 2026 RI-1040 instructions for the exact lines.

Is there a tax question on the November 2026 ballot?

No. The ballot questions are bond authorizations. Nothing on it changes the 2026 return.

The 2026 return is last year’s return with larger numbers; the big changes start with 2027

Claim the indexed deduction and exemptions, expect nothing from the federal tips, overtime and senior deductions, and if you owe back years, file them between December 3 and February 15.

Written by Charles Trautman, EA, editor  ·  Need to Know Tax, Lone Tree, Colorado
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Updated November 12, 2026, after the November 3 election · tax year 2026 figures · awaiting review by a Rhode Island practitioner — use the right article