Short-Term Rental Taxes in Rhode Island: What Investors Need to Know in 2025

Rhode Island — the nation's smallest state — has a concentrated STR market centered on Newport (luxury coastal and sailing culture), the South County beaches, and Block Island (an island accessible by ferry). The state's partial bonus depreciation conformity (limiting the first-year deduction to 50% of the federal amount) is a middle-ground approach that provides partial state benefit while deferring the remainder.

Rhode Island State Income Tax

Rhode Island's graduated income tax tops out at 5.99% on income above approximately $166,950. Most STR investors with meaningful rental income will be at or near this top rate. Rhode Island begins with federal AGI and makes RI-specific adjustments. The partial bonus depreciation conformity (see below) affects how first-year depreciation deductions flow to the RI return.

Rhode Island's 50% Bonus Depreciation Partial Conformity

Rhode Island allows 50% of the federal bonus depreciation deduction in year one — better than states that allow nothing (like PA or NJ), but worse than full conformity. For a $100,000 federal bonus depreciation deduction, Rhode Island allows $50,000 in year one and then deducts the remaining $50,000 over the asset's normal MACRS life in subsequent years.

At the 5.99% top rate, the year-one impact is approximately $3,000 in additional RI taxes compared to full federal conformity (tax on the $50,000 addback). This is a relatively modest timing penalty compared to states that disallow all bonus depreciation.

Rhode Island Hotel and Hospitality Taxes

Newport: Rhode Island's Premier STR Market

Newport is Rhode Island's dominant STR market, anchored by its Gilded Age mansion heritage (The Breakers, Marble House, Rosecliff), the Newport Sailing Museum, the Newport Jazz and Folk Festivals, and a thriving waterfront restaurant and bar scene. Newport draws a premium demographic and commands some of the highest nightly rates in New England outside of Nantucket and Martha's Vineyard.

Newport properties range from charming historic colonial homes in the Point neighborhood to large waterfront estates on Bellevue Avenue. The market has year-round appeal — sailing tourism in summer, mansion tours and festivals in fall, and the Gilded Age Christmas events in December keep occupancy relatively strong outside peak summer.

Block Island: Rhode Island's Island STR Market

Block Island, accessible by ferry from Point Judith (one hour) or New London, CT, is Rhode Island's island escape. With no traffic lights and over 40% of land protected as nature reserves, Block Island draws visitors seeking a quieter alternative to the Vineyard or Nantucket. The ferry-access model creates a natural supply constraint that supports strong ADRs in peak season.

Cost Segregation in Rhode Island

Rhode Island's partial conformity means cost segregation delivers roughly 50% of the potential state benefit in year one — better than non-conforming states. For a $600,000 Newport property with $140,000 in cost seg deductions, the combined first-year benefit is $51,800 federal (37%) + $4,193 RI state (5.99% on the $70,000 allowed in year 1) = $55,993 combined. The remaining $70,000 in RI deductions are recovered over the asset lives.