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Rhode Island Income Tax Explained

If you earn an income in Rhode Island, you know you’ll lose something to federal and Rhode Island State taxes. But how much? It’s important to understand your state’s taxes and how they will impact your financial future, not least because that knowledge will empower you to take action to reduce your tax bill today.

So, let’s dive in!

What is the Income Tax? 

We’ll explore the specifics of Rhode Island income tax shortly. But first, the basics. Income taxes are taxes imposed on individuals or entities that earn ordinary income. Ordinary income refers to the income that you earn from your usual sources, like a paycheck from your job, or profits from your small business. It’s also the money you might get from things like rental income, dividends, interest, royalties, and even some retirement accounts.

Think of ordinary income as the typical money you earn day in and day out. Unlike other types of income such as long-term capital gains or qualified dividends, which can get preferential tax treatment, your ordinary income gets no special tax perks and typically has a higher tax rate.

The amount of income tax a person or entity pays typically depends on their income level: The federal income tax and most state versions are “progressive,” which means that the share of your income that you will pay in taxes goes up as you earn more, though some states do levy a fixed percentage, or “flat,” income tax.

In the United States, federal income taxes can range from 10% to 37% of a person’s taxable income, and state taxes run from 0% in nine states to north of 13%. In addition to federal income taxes, most states also impose their own income taxes, which can vary widely.

Let’s now walk through both types of income taxes.

What is the Federal Income Tax?

The federal income tax is a tax that the United States government levies on the annual earnings of individuals, corporations, trusts, and other legal entities. It’s a portion of your income you must pay to the federal government to fund its operations. This tax is progressive, which means the tax rate you pay — the percentage of each additional dollar that goes to the government — increases as your income increases. For individuals, the income tax rates on ordinary income (as distinguished from capital gains) start at 10% and increase up to 37% as your income tax bracket increases.

The amount of tax you owe each year is calculated based on your gross income, which includes wages, interest, dividends, and other earnings.

Federal Ordinary Income Tax Rates for 2023

Taxable Income (Single Filers)Taxable Income (Married Filing Jointly)Tax Rate on This Income
$0 to $11,000$0 to $22,00010%
$11,000 to $44,725$22,000 to $89,45012%
$44,725 to $95,375$89,450 to $190,75022%
$95,375 to $182,100$190,750 to $364,20024%
$182,100 to $231,250$364,200 to $462,50032%
$231,250 to $578,125$462,500 to $693,75035%
$578,125 or more$693,750 or more37%

Federal Income tax rates in Rhode Island

What would these numbers look like in the real world? Let’s consider an individual whose taxable ordinary income is $350,000. This person falls into the 35% tax bracket. As a result of the progressive tax system, however, not every dollar they earn will be taxed at that rate. As you can see from the table, the 35% bracket begins at $231,250 of income. This means that the dollars the individual earns over $231,250 will be taxed at 35%. But dollars below that amount will be taxed at the rate corresponding to the brackets they fall into.

So, for this individual:

  • The first $11,000 of income is taxed at 10% (for a total of $1,100)
  • The next portion of income, from $11,000 to $44,725, is taxed at 12% (for a total of $4,047)
  • The income from $44,725 to $95,375 is taxed at 22% (for a total of $11,143)
  • The income from $95,375 to $182,100 is taxed at 24% (for a total of $20,814)
  • The income from $182,100 to $231,250 is taxed at 32% (for a total of $15,728)
  • And finally, the income from $231,250 (the beginning of the 35% bracket) to $350,000 (this individual’s income) is taxed at 35% (for a total of $41,562)

Adding these amounts together, the individual would pay a total of $94,394 in federal income taxes for 2023.

You now understand how federal income tax rates apply! What about Rhode Island State taxes?

What is Rhode Island state income tax?

The Rhode Island State Income Tax is a state-level tax imposed on the income of individuals, businesses, or other legal entities. Like the federal income tax, the Rhode Island state income tax is progressive, meaning the rate of taxation increases as taxable income increases.

In 2023, the Rhode Island state income tax rates range from 3.75 % to 5.99%.

Rhode Island Income Tax Brackets for 2023

Taxable Income (Single Filers)Taxable Income (Married Filing Jointly)Tax Rate on This Income
$0 to $68,200$0 to $68,2003.75%
$68,200 to $155,050$68,200to $155,0504.75%
$155,050 or more $155,050 or more 5.99%

Rhode Island Income Tax Rates

Let’s consider an individual who has a taxable income of $350,000 in Rhode Island state. This person falls into the 5.99% tax bracket. However, Rhode Island, like the federal government, uses a progressive tax system, which means that different portions of the individual’s income are taxed at the different rates corresponding to the brackets they fall into.

Here’s how it breaks down for this individual:

  • The first $68,200 of income is taxed at 3.75% ($2,558)
  • The next portion of income from $68,200 to $155,050 is taxed at 4.75% ($4,125)
  • Finally, the remaining income from $155,050 to $350,000 is taxed at 5.99% ($11,678)

Adding these amounts together, the individual would pay a total of $18,361 in Rhode Island state income taxes for 2023.

What is tax planning?

As you can see, income taxes are the primary tax most individuals face and are often their biggest annual cost. Accordingly, it’s critical to identify strategies that can reduce this tax.

Tax planning is a strategic approach designed to reduce a person’s or a company’s tax liability by leveraging various tax benefits and allowances. It’s about understanding the tax implications of your financial decisions, so you can minimize your taxes and, ultimately, keep more of your hard-earned money.

This might involve making investments that offer tax benefits, choosing the right type of retirement account, taking advantage of deductions and credits, or investing in a tax advantaged account.

4 tax planning ideas to reduce Rhode Island income taxes

Several different tax planning strategies can help you reduce your income tax liability in Rhode Island. Here are the five we consider most advantageous:

  1. Maximize Retirement Contributions: Both federal and Rhode Island state tax laws allow deductions for contributions to certain retirement accounts like a 401(k) or an IRA. Maxing out these contributions can lower your taxable income.
  2. Charitable and Other Deductions: If you have significant deductible expenses such as home mortgage interest or charitable contributions, itemizing your deductions on your state and federal tax returns might offer a larger tax benefit than the standard deduction. If you are charitably inclined, a Charitable Lead Annuity Trust (CLAT) might be an option to increase your charitable deductions this year and minimize your income tax liability.
  3. Sell Appreciated Assets in Tax Exempt Trusts: You can minimize your taxable capital gains by moving appreciated assets into a tax exempt trust like Charitable Remainder Trusts before you sell them. Learn more about Charitable Remainder Trusts here.
  4. Invest in Renewable Energy Projects: By investing in renewable energy projects you can use government tax incentives like tax credits and depreciation to significantly lower your income taxes. You can learn more here.


The federal and Rhode Island income taxes can significantly reduce the wealth your family keeps every year. Fortunately, there are several strategies available to minimize these income taxes. You can read more here, use our Guided Planner tool to find helpful solutions, or schedule a time to talk with our expert team

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