Capital gains tax in Rhode Island (2026): selling a business, real estate or farm

A countdown to the surtax

For 2026, Rhode Island uses a single rate schedule for every filer: 3.75% up to $82,050 of taxable income, 4.75% up to $186,450, and 5.99% above that (RI Division of Taxation Advisory 2025-22). There is no capital gains rate, so a business sale is taxed like salary.

That changes in 2027. The fiscal 2027 budget, House Bill 7127 Substitute A, adds a High-Income Surtax on personal income over $1,000,000: 1% for tax year 2027, 2% for 2028 and 3% from 2029 on, where it stays (RI Division of Taxation, 2026 summary of legislative changes). The $1,000,000 threshold is indexed for inflation and is the same for single filers and married couples filing jointly. For a one-time sale, that makes the closing date a planning variable that did not exist before.

Federal tax applies at 0%, 15% or 20% on long-term gain, with 20% above $613,700 of joint taxable income for 2026 (Rev. Proc. 2025-32); see the federal capital gains guide.

Worked example: the same $3,000,000 sale in three years

A joint-filing couple with $200,000 of other income sells the business they ran for a $3,000,000 long-term gain.

Waiting until 2029 costs $66,000 more in Rhode Island tax on the same deal. The surtax works on each year's income, so a Section 453 installment sale signed in 2026 that keeps every year under $1,000,000 of income avoids it entirely: spread over 2026 to 2030, Rhode Island tax is $179,700 and total tax $668,225. A large lump payment in 2027 or later would not escape it, so the note schedule matters as much as the closing date. Seller financing carries buyer-credit risk; seller financing covers the protections.

Who else the surtax reaches

The surtax applies to every personal income tax filer, including married filing separately, head of household and surviving spouses, at the same indexed $1,000,000 line (2026 legislative summary). Two groups need extra care:

• Trusts and estates hit the surtax above $36,427 of income, indexed, on the same 1% to 3% schedule. A non-grantor trust that sells a business interest would cross it almost immediately.
• Pass-through entities that elect to pay Rhode Island tax at the entity level at 5.99% may also elect to pay the surtax there for tax years from 2027 (R.I. Gen. Laws 44-11-2.3 as amended), keeping the payment deductible federally. See pass-through entity tax on a sale.

The standard deduction and exemptions also phase out between $261,000 and $290,800 of income for 2026 (Advisory 2025-22), so a sale year usually loses them.

QSBS gains lose Rhode Island protection in 2027

Rhode Island has permanently decoupled from the federal exclusion for qualified small business stock under IRC 1202 for tax years beginning on or after January 1, 2027, along with the new federal treatment of research expenses and part of the business interest limit (2026 summary of legislative changes). A founder whose federal gain is fully excluded would add that gain back for Rhode Island from 2027. Closing a QSBS sale in 2026, before both the decoupling and the surtax, can matter a great deal; the QSBS analysis explains the federal side.

Selling Rhode Island real estate as a nonresident

When a nonresident sells Rhode Island real property, the buyer must withhold 6% of the net proceeds actually paid to an individual, estate, partnership or trust, or 7% for a nonresident corporation, and send it within three banking days of closing (R.I. Gen. Laws 44-30-71.3). The seller can instead elect to have 6% withheld on the gain by filing Form RI-71.3 at least 20 days before closing, and the regulation allows the gain to be reported in the year of sale or on the installment method (280-RICR-20-10-1). Withholding is a prepayment, not the final tax, which is computed on the nonresident return.

Conveyance tax and the estate tax

Rhode Island's realty conveyance tax is $3.75 per $500 of consideration, paid by the seller unless the contract says otherwise, and it also applies to transfers that make an entity an acquired real estate company. On residential property, another $3.75 per $500 applies to the price above $800,000 (R.I. Gen. Laws 44-25-1). Rhode Island also has its own estate tax with an inflation-indexed threshold that sits far below the federal exemption (R.I. Gen. Laws 44-22-1.1), so an older owner should weigh a sale against holding for the step-up. Compare New England neighbors on the capital gains tax by state page, such as Massachusetts. For your own numbers across every path, get the Big Sale Tax Analysis.

Run your own numbers

Frequently asked questions