Rhode Island House approves $13.9 billion budget with new real estate taxes
Rhode Island could add a “Taylor Swift Tax” to charge semi-vacant mansion owners thousands more. State lawmakers are working on a budget that includes two significant changes to real estate taxes.
The state House of Representatives approved the budget on a 66-9 vote on Tuesday, June 17.
‘Taylor Swift Tax’ targets second homes over $1 million
One of those changes is the non-owner-occupied tax, commonly referred to as the “Taylor Swift Tax.” This means that if someone owns a second home valued at more than $1 million in Rhode Island, they will now have to pay an additional surcharge tax.
Taylor Swift owns a sprawling mansion in Watch Hill, a small seaside community that’s known for its charming grand homes, views overlooking the Atlantic Ocean and scenic lighthouse. Swift purchased the home for $17.75 million in 2013, and now, Rhode Island’s new budget proposal could hit Swift and dozens of other wealthy neighbors with six-figure tax bills.
According to Realtor.com, the rate is $2.50 for every $500 of assessed value above the first million dollars. This leaves owners of these homes two choices: live in the home for half the year – 183 days – or rent out the home for the majority of the year so it doesn’t sit empty. Unless Swift decides to become a Rhode Island resident, WJAR reports the new tax would reportedly cost her an additional $136,000 a year in property taxes.
Conveyance tax increase affects property sales
The second change is that the conveyance tax is now increasing by 63%, meaning sellers will owe significantly more when they transfer ownership of their property.
Funds to support affordable housing efforts
The money collected from the two specific taxes will be used to fund housing programs, including the creation of more affordable housing options and low-income tax credits, to help make housing more affordable for low-income individuals and families.
Supporters of the bill argue that the new tax could generate revenue to help build or support housing for people with lower incomes.
Unintended consequences
Critics of the new mansion tax argue that it may reduce interest or desire among potential buyers. The new recurring charge may deter wealthy buyers who may seek vacation homes in other desirable areas.
Others, according to Realtor.com, worry that the tax would eventually be changed to affect more than just wealthy mansion owners should the need arise.
“The proposed tax could have a variety of impacts,” Hannah Jones, senior economic research analyst at Realtor.com, said. “High net worth households may just pay the tax, while other longtime owners may consider short-term leasing of their property to get around the higher tax assessment. It is possible that some owners would sell, but others may exhaust other options before letting go of their high-dollar real estate.”
The Rhode Island Association of Realtors is planning to fight back, Realtor.com reports.
Senate consideration up next
The same tax was proposed in 2015 and failed.
The proposed budget is now in the hands of the Rhode Island Senate, which would need to approve the legislation for it to be signed into law. If it becomes law, the new property taxes would take effect in July 2026.
Ella Rae Greene, Editor In Chief
