Updated October 8, 2026. Quick answer: Generally no, if you qualify for the federal exclusion. The Division says “Rhode Island income tax is based on your federal adjusted gross income”, and its instructions list “IRC Section 121-Sale of Principal Residence” among sales “exempt from federal taxation and thus state taxation”. Gain above it is taxed at 3.75%, 4.75% or 5.99%, and the seller pays the conveyance tax.
Rhode Island tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Based on federal adjusted gross income; the Division’s instructions list the section 121 sale as exempt from federal and so state taxation |
| Rate on gain above the exclusion | Graduated: 3.75%, 4.75% and 5.99% |
| Collected at the sale | Seller-paid real estate conveyance tax: $3.75 per $500 of consideration, plus a second tier of the same rate on residential value over $800,000; nonresident sellers: the buyer withholds 6% of the net proceeds or gain (7% for a nonresident corporation) |
| Source | Rhode Island Division of Taxation; RI Division of Taxation |
What the Rhode Island documents say
The 2025 RI-1040 instructions say “Rhode Island income tax is based on your federal adjusted gross income”. The Division’s instructions for nonresident sellers of Rhode Island real estate list, among situations that would make a sale or part of it “exempt from federal taxation and thus state taxation”, the item “IRC Section 121-Sale of Principal Residence”. That document is for nonresident sellers and dates from 2020, but it describes what is exempt from federal and therefore state tax.
The 2025 instructions print the rates “3.75% 4.75% 5.99%”. Advisory 2025-22 prints the “Uniform tax rate schedule for Tax Year 2026”: 3.75% up to $82,050, then 4.75%, then 5.99%, so the rates are unchanged and the breakpoints rose.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Rhode Island sells their main home with a gain of $400,000 and meets the federal ownership and use tests. The gain is below the $500,000 joint exclusion, so it is not in federal adjusted gross income and, on the documents read, $0 is taxed by Rhode Island. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exclusion would then be $100,000, which is taxed at the graduated rates; this page computes no tax because the bracket depends on the rest of the return.
What is collected at the sale
The Division’s page says the conveyance tax “must be paid by the seller, grantor, assignor, transferor” or person making the conveyance, unless the parties agree otherwise. Advisory 2025-13 says “Rates increase from $2.30 to $3.75 per each $500” as of October 1, 2025. For residential property conveyed for more than $800,000 a second tier applies, and the Tier 2 rate is “imposed in addition to the Tier 1 rate”. The advisory adds that the “$800,000 threshold for the Tier 2 rate will be adjusted” for inflation. The page lists no principal-residence exemption. Withholding on a sale applies to nonresident sellers, not to Rhode Island residents. The rule, 280-RICR-20-10-1, says the “buyer must deduct and withhold six percent (6%) of the net proceeds or gain to the seller if the seller is a nonresident individual, estate, partnership or trust and seven percent (7%) of the net proceeds or gain if the seller is a nonresident corporation”.
What changes in 2026
Rhode Island: the conveyance tax rose from $2.30 to $3.75 per $500 on October 1, 2025, and the Tier 2 threshold of $800,000 is adjusted for inflation from January 1, 2026; the 2026 income tax rates are unchanged and the first bracket now ends at $82,050.
What the documents do not say
- The section 121 statement is in a 2020 document for nonresident sellers, and the resident instructions read do not name section 121. The conveyance tax is a cost of the sale, not a tax on gain. The instructions are for tax year 2025; the 2026 breakpoints come from Advisory 2025-22.
Common mistakes
- Using the 2025 breakpoints for a 2026 sale; the advisory raises them.
- Treating the conveyance tax as a tax on your profit; it is computed on the consideration, not on gain.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Rhode Island taxes capital gains, Rhode Island retirement taxes, and home sale exclusion calculator.
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Answer againSources
- 2025 RI-1040 Resident Instructions: https://tax.ri.gov/sites/g/files/xkgbur541/files/2025-12/2025%201040R%20Instructions%20122025.pdf
- General Instructions: Sale of Rhode Island Real Estate by Nonresidents: https://tax.ri.gov/sites/g/files/xkgbur541/files/forms/2020/NRREWH/NRREWH-Instructions_092020.pdf
- Real Estate Conveyance Tax (Division of Taxation web page): https://tax.ri.gov/tax-sections/sales-excise-taxes/real-estate-conveyance-tax
- ADV 2025-13 Real Estate Conveyance Tax Increases as of October 1, 2025: https://tax.ri.gov/sites/g/files/xkgbur541/files/2025-08/ADV_2025_13_Conveyance_tax_increase.pdf
- Advisory 2025-22 Inflation Adjustments: https://tax.ri.gov/sites/g/files/xkgbur541/files/2025-11/ADV_2025_22_Inflation_Adjustments.pdf
- 2026 Rhode Island Employer’s Income Tax Withholding Tables: https://tax.ri.gov/sites/g/files/xkgbur541/files/2025-12/2026%20Withholding%20Tax%20Booklet.pdf
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
- 280-RICR-20-10-1, Withholding Tax on the Sale of Real Property by Nonresidents (Rhode Island Secretary of State; read October 8, 2026): https://rules.sos.ri.gov/Regulations/part/280-20-10-1
Sources: the primary documents linked above, read on October 8, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.