The top rate for the Rhode Island estate tax is 16%. It kicks in for estates worth more than $1,733,264 in 2023. If you live in Rhode Island and are thinking about estate planning, this guide has the information you need to get started, but professional help in the form of a financial advisor can help you whether your planning an estate or dealing with any other financial planning issues. SmartAsset’s financial advisor matching services can help you find the right advisor for your individual needs.
Rhode Island Estate Tax Exemption
The estate tax threshold for Rhode Island is $1,733,264. If your estate is worth less than that, you owe nothing to the state of Rhode Island. If it is worth more than that, there is a progressive ladder of tax rates that will determine how much you owe.
Rhode Island Estate Tax Rate
The estate tax rate for Rhode Island is graduated. The full list of rates can be found in the table below. Start by finding your taxable estate bracket. The second column will show the base taxes owed on the money that falls below your bracket. Then, subtract the bottom of your bracket from your total taxable estate. Multiply that number by the marginal rate and add the answer to the base taxes. That’s the total state estate tax burden.
Here’s an example: Let’s say your total estate is worth $3,381,875. Subtracting the exemption of $1,733,264, leaves a taxable estate of $1,648,611. Find where that number falls on the chart. The base tax owed for the bracket is $70,800. The bottom of the threshold is $1.54 million, so we subtract that from $1,662,344 million and get $122,344. That sum ($122,344) multiplied by the marginal rate of 7.2% is $7,820. Finally we add $7,820 to the base taxes ($70,800) to get a total Rhode Island estate tax burden of $78,620 on a $3,381,875 million estate.
Note: The chart below shows no taxes owed on the first $40,000 of taxable income because of a system of tax credits from the state.
|RHODE ISLAND ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $40,000||$0||0%||$0|
|$40,000 – $90,000||$0||0.8%||$40,000|
|$90,000 – $140,000||$400||1.6%||$90,000|
|$140,000 – $240,000||$1,200||2.4%||$140,000|
|$240,000 – $440,000||$3,600||3.2%||$240,000|
|$440,000 – $640,000||$10,000||4.0%||$440,000|
|$640,000 – $840,000||$18,000||4.8%||$640,000|
|$840,000 – $1.04 million||$27,600||5.6%||$840,000|
|$1.04 million – $1.54 million||$38,800||6.4%||$1.04 million|
|$1.54 million – $2.04 million||$70,800||7.2%||$1.54 million|
|$2.04 million – $2.54 million||$106,800||8.0%||$2.04 million|
|$2.54 million – $3.04 million||$146,800||8.8%||$2.54 million|
|$3.04 million – $3.54 million||$190,800||9.6%||$3.04 million|
|$3.54 million – $4.04 million||$238,800||10.4%||$3.54 million|
|$4.04 million – $5.04 million||$290,800||11.2%||$4.04 million|
|$5.04 million – $6.04 million||$402,800||12.0%||$5.04 million|
|$6.04 million – $7.04 million||$522,800||12.8%||$6.04 million|
|$7.04 million – $8.04 million||$650,800||13.6%||$7.04 million|
|$8.04 million – $9.04 million||$786,800||14.4%||$8.04 million|
|$9.04 million – $10.04 million||$930,800||15.2%||$9.04 million|
|$10.04 million and up||$1,082,800||16.0%||$10.04 million|
*The taxable estate is the total above the exemption of $1,733,264.
**The rate threshold is the point at which the marginal estate tax rate goes into effect.
What Is the Estate Tax?
The estate tax is a tax some states and the federal government levy on the estates of wealthy people after they die but before the money is passed on to their heirs. It is sometimes called the “death tax.”
Don’t confuse the estate tax with the inheritance tax, which is a separate tax some states levy on recipients of an inheritance after they’ve received the money.
Rhode Island Inheritance Tax and Gift Tax
There is no inheritance tax in Rhode Island. It is possible, though, that the laws of another state could apply to you if the person passing money on to you died there. In Pennsylvania, for example, the inheritance tax applies to out of state heirs for in-state decedents.
Rhode Island also has no gift tax. The federal gift tax has an exemption of $16,000 per person per year in 2022 and $17,000 in 2023. Any gift worth more than that to one person in a single year will count against your lifetime exemption of $12.92 million.
Rhode Island Estate Tax for Married Couples
The Rhode Island estate tax is not portable between spouses. This means that when both members of a married couple die, only a single exemption of $1,733,264 applies, not double that figure.
Federal Estate Tax
There is also a federal estate tax that may apply. The federal estate tax exemption is $12.06 million in 2022, increasing to $12.92 million in 2023. The federal exemption is portable between spouses. This allows a married couple to protect up to $25.84 million after both spouses have died, assuming the right legal steps are taken.
If an estate exceeds the exemption, the federal estate tax rate starts at 18% and goes up 40%. A full chart of federal estate tax rates is below. You can use the same method described in the Rhode Island Estate Tax section to figure out your federal estate tax burden.
|FEDERAL ESTATE TAX RATES|
|Taxable Estate*||Base Taxes Paid||Marginal Rate||Rate Threshold**|
|$1 – $10,000||$0||18%||$1|
|$10,000 – $20,000||$1,800||20%||$10,000|
|$20,000 – $40,000||$3,800||22%||$20,000|
|$40,000 – $60,000||$8,200||24%||$40,000|
|$60,000 – $80,000||$13,000||26%||$60,000|
|$80,000 – $100,000||$18,200||28%||$80,000|
|$100,000 – $150,000||$23,800||30%||$100,000|
|$150,000 – $250,000||$38,800||32%||$150,000|
|$250,000 – $500,000||$70,800||34%||$250,000|
|$500,000 – $750,000||$155,800||37%||$500,000|
|$750,000 – $1 million||$248,300||39%||$750,000|
|Over $1 million||$345,800||40%||$1 million|
*The taxable estate is the total above the exemption of $12.92 million.
**The rate threshold is the point at which the marginal estate tax rate kicks in.
Overall Rhode Island Tax Picture
Rhode Island income taxes are in line with the national average. The state has a progressive income tax rate ranging from 3.75% to 5.99%. You can use our Rhode Island paycheck calculator to see what your take home pay will be after taxes. The state is not a very tax-friendly state for retirees: Social Security is partially taxed, while retirement accounts and pensions are both fully taxed.
The average effective property tax rate in Rhode Island is 1.30%, the 15th-highest in the country. The state’s sales tax rate is 7%, and there are no local sales taxes to raise that percentage.
Estate Planning Tips
- Whether you’re estate planning or working on another element of financial planning, it can be a good idea to get professional help. A financial advisor can help you navigate the road and make the best choices for you and your family. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Don’t forget about beneficiaries. Assets like retirement accounts and life insurance are passed on to beneficiaries that you must select. When you’re planning your estate, it’s a good idea to double check that you’ve selected beneficiaries and they’re still current.
- Planning your estate may not be fun, but even after you are done its important not to forget about it. When major life events happen, make sure you update your will to include any new relevant details.
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