Changes to the taxation of short-term rentals in Rhode Island
2026 will be here before we know it, and if you own or manage short-term rentals, you need to know about this new RI short-term rental tax law that takes effect 1/1/26. In Rhode Island, short-term rentals include all rentals of lodging where the rental period is 30 consecutive days or fewer. The following two changes impacting such short-term rentals will go into effect January 1, 2026:
Change 1: Applies to all short-term rentals Increase to local hotel tax rate.
All short-term rentals, including hotels, in Rhode Island are subject to a 1% “local” hotel tax. Effective January 1, 2026, Rhode Island’s local hotel tax rate will increase from 1% to 2%.
Change 2: New whole home short-term rental tax - Applies only to a residential dwelling rented in its entirety.
A new 5% tax will apply to the short-term rental of a residential dwelling rented in its entirety. The tax is calculated based on the total charge for a short-term rental of a residential dwelling rented in its entirety. Generally, rentals that will be subject to the tax are short-term rentals including houses, condos, mobile homes, and other residential dwellings, and will include vacation rentals and/or rentals offered through online hosting platforms. This whole home short-term rental tax is distinct from the 5% state hotel tax on single room rentals including hotel rooms and other short-term room rentals. No single short-term stay would be subject to both the 5% state hotel tax and the 5% whole home short-term rental tax.
In some cases, short-term residential dwelling rentals may be booked months, or even a year, in advance. Short-term rentals where the occupancy is on or after 01/01/26 are subject to the new tax. All state and local taxes are based on date of occupancy. The tax rates in effect at the time of occupancy apply to all short-term rentals. When full payment is made in 2025 for a 2026 rental, the taxes collected should be at the 2025 rate, and the difference in
the tax rate for 2026 should be charged at the time of checkout from the rental.
In summary, if you are renting for 30 days or less, the taxes collected and remitted are as follows:
- Room: 7% sales tax + 5% statewide hotel tax + 2% local hotel tax
- Whole residential dwelling (i.e. house, condo, mobile home, etc): 7% sales tax + 5% whole home short-term rental tax + 2% local hotel tax
If you own short-term rentals, these new taxes will of course have financial implications for your business. If you'd like to discuss these concerns, your investment strategy, or the real estate market, please call The Jodie Jordan Group at 401-371-3270.
For questions about hotel and short-term rental taxes, contact the Rhode Island Division of Taxation’s Excise Tax Section by email at [email protected], or by phone at (401) 574-8955 between 8:30 a.m. and 3:30 p.m. on business days.
