Rhode Island capital gains tax on real estate is simple on paper: gains are ordinary income, taxed at 3.75%, 4.75% or 5.99%, with the same brackets for every filing status. A 1031 exchange in Rhode Island defers that tax and the federal tax, and for nonresident sellers it is the basis for filing Form RI-71.3 so that 6% withholding is not taken at closing. What an exchange cannot touch is the realty conveyance tax, which rose to $3.75 per $500 on October 1, 2025.
Reviewed by Jon Hilley, CEO & Founder of 1031 Specialists. Last reviewed September 29, 2026.
| State tax on real estate gains | Ordinary income: 3.75%, 4.75%, and 5.99% above $181,650 (2025 schedule, all filers) |
|---|---|
| Long-term capital gains treatment | No state preference or exclusion |
| Nonresident withholding at closing | 6% for individuals, trusts and pass-throughs; 7% for corporations |
| Withholding form | Form RI-71.3 election of gain and certificate of withholding due, filed at least 20 days before closing |
| Transfer or conveyance tax (a 1031 does not defer it) | $3.75 per $500 paid by the seller, plus $3.75 per $500 above $800,000 on residential sales |
| Clawback on out-of-state replacement property | No annual clawback form |
| Conforms to Section 1031 | Yes |
| Property tax note | New state tax on non-owner-occupied homes assessed over $1 million, from July 1, 2026 |
Table of contents
- How much is capital gains tax on real estate in Rhode Island?
- Rhode Island tax on a $300,000 gain: worked example
- Rhode Island nonresident withholding and Form RI-71.3
- Rhode Island realty conveyance tax
- New tax on non-owner-occupied homes over $1 million
- Conformity and clawback
- Moving into or out of Rhode Island
- Where 1031 exchanges happen in Rhode Island
- Federal 1031 rules
- Common Rhode Island 1031 exchange mistakes
- Start your Rhode Island 1031 exchange
- Frequently asked questions
- Sources
How much is capital gains tax on real estate in Rhode Island?
Rhode Island taxes the gain from a property sale along with your other income. The Division of Taxation's 2025 schedule applies to all filing statuses: 3.75% up to $79,900, 4.75% up to $181,650 and 5.99% above that. Because a single sale usually pushes an investor well past $181,650, plan on 5.99% for most of the gain.
There is no Rhode Island capital gains exclusion, no separate rate for long-term gains and no local income tax. Depreciation recapture is taxed at the same 5.99%, while the federal government taxes it at up to 25%. Run the federal number with the depreciation recapture calculator.
Rhode Island tax on a $300,000 gain: worked example
Assumptions: a $300,000 long-term gain on investment property, $100,000 of it unrecaptured §1250 depreciation, married filing jointly, already in the top federal and top Rhode Island bracket.
| Tax | Math | Amount |
|---|---|---|
| Unrecaptured §1250 gain (depreciation) | 25% x $100,000 | $25,000 |
| Remaining long-term gain | 20% x $200,000 | $40,000 |
| Net investment income tax | 3.8% x $300,000 | $11,400 |
| Federal subtotal | $76,400 | |
| Rhode Island income tax | 5.99% x $300,000 | $17,970 |
| Total deferred by a full 1031 | $76,400 + $17,970 | $94,370 |
See how a sale compares with our capital gains vs. 1031 comparison.
Rhode Island nonresident withholding and Form RI-71.3
When a nonresident sells Rhode Island real estate, the buyer must withhold and remit tax to the Division of Taxation. The rate is 6% for individuals, estates, trusts and pass-through entities (including LLCs taxed as partnerships) and 7% for corporations and LLCs taxed as corporations.
Sellers can file the Nonresident Election of Gain and Certificate of Withholding Due (Form RI-71.3) so withholding is based on the gain rather than the price. The Division lists an IRC Section 1031 like-kind exchange as a non-taxable transaction on that form, and it requires the name, address and phone number of your qualified intermediary. File it by mail or email at least 20 days before closing; the Division issues an approved certificate, and the buyer then files the remittance and discharge of lien forms. Foreign sellers should also read about FIRPTA withholding.
Rhode Island realty conveyance tax
Under R.I. Gen. Laws section 44-25-1, as amended effective October 1, 2025, the conveyance tax is $3.75 for each $500 of consideration ($7.50 per $1,000). Unless the contract says otherwise, the seller pays. Residential sales above $800,000 pay an additional $3.75 per $500 on the amount over $800,000, a threshold indexed for inflation starting in 2026.
| Sale | Base tax | Residential add-on | Total |
|---|---|---|---|
| $600,000 commercial | $4,500 | $0 | $4,500 |
| $1,200,000 residential | $9,000 | $3,000 | $12,000 |
| $2,000,000 residential | $15,000 | $9,000 | $24,000 |
A 1031 exchange does not defer the conveyance tax. It is paid from sale proceeds, which reduces the cash available to reinvest.
New tax on non-owner-occupied homes over $1 million
Starting July 1, 2026, Rhode Island levies a state tax on residential property assessed over $1,000,000 that the owner does not occupy for at least 183 days a year. The rate is $2.50 per $500 of assessed value above $1 million, so a $1.5 million Newport house costs $2,500 a year. Long-term rentals under the Residential Landlord and Tenant Act and short-term rentals subject to sales tax are exempt if rented 183 days or more. For exchangers, that means a replacement property used as a real rental is generally exempt, while a lightly rented beach house is not. Payments are due quarterly starting September 15.
Conformity and clawback
Rhode Island follows federal income, so Section 1031 deferral carries through. Rhode Island does not have a California-style annual form for out-of-state replacement property. Gain from Rhode Island real estate remains Rhode Island-source for a nonresident, so keep your Form 8824 and RI-71.3 records.
Moving into or out of Rhode Island
Many sellers of Newport, Narragansett and Block Island property live in Massachusetts, Connecticut or New York, and they are the ones who need Form RI-71.3. Rhode Island owners who move often exchange into Florida or New Hampshire. See Massachusetts and Connecticut for neighboring rules.
Where 1031 exchanges happen in Rhode Island
Providence, Pawtucket and Cranston drive multifamily and small commercial trades, including the three-decker buildings common in the region. Coastal towns from Westerly to Newport supply vacation rental exchanges. We have no Rhode Island city guides yet.
Federal 1031 rules
You must identify replacement property within 45 days and acquire it within 180 days of the sale, with a qualified intermediary holding the money. Reinvest at least the net sale price and replace the debt. Try the 45-day identification validator, the 1031 exchange calculator and our 1031 exchange guides.
Common Rhode Island 1031 exchange mistakes
- Filing RI-71.3 late. The Division asks for at least 20 days before closing.
- Leaving the intermediary off the form. The 1031 claim needs the QI's contact details.
- Using the old conveyance rate. Budget $7.50 per $1,000, not the pre-October 2025 figure.
- Buying a replacement beach house you barely rent. It can face the new non-owner-occupied tax and weak 1031 facts.
- Taking boot without planning. Cash out is taxed at up to 5.99% in Rhode Island.
Start your Rhode Island 1031 exchange
Open your exchange at least three weeks before closing so we can supply the intermediary details for Form RI-71.3. Start your exchange or book an intro call.
Frequently asked questions
How can I avoid capital gains tax on real estate in Rhode Island?
A 1031 exchange through a qualified intermediary defers Rhode Island and federal tax when you reinvest in like-kind investment property. Holding until death can eliminate the gain through a basis step-up.
What is Rhode Island's capital gains tax rate?
Rhode Island taxes gains as ordinary income at 3.75%, 4.75% or 5.99%. The top rate applies above $181,650 of taxable income under the 2025 schedule.
How much does Rhode Island withhold from nonresident sellers?
6% for individuals, trusts and pass-through entities and 7% for corporations, unless the seller files Form RI-71.3 to base withholding on gain or claim an exemption.
Does a 1031 exchange stop Rhode Island withholding?
Yes, if you file Form RI-71.3 at least 20 days before closing, claim the Section 1031 like-kind exchange and list your qualified intermediary.
How much is the Rhode Island conveyance tax?
It is $3.75 per $500 of the price, usually paid by the seller, plus $3.75 per $500 above $800,000 on residential sales. A 1031 exchange does not defer it.
Sources
- RI Division of Taxation: 2025 tax rate schedule
- RI Division of Taxation: Nonresident real estate withholding forms
- RI Division of Taxation: Instructions for sale of Rhode Island real estate by nonresidents
- R.I. Gen. Laws section 44-25-1: realty conveyance tax
- RI Division of Taxation: Non-owner occupied property tax
Related: Massachusetts, Connecticut, New York and all 50 states.
General information only, not tax or legal advice. Confirm your Rhode Island sale with a CPA or attorney.
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