Rhode Island's Millionaire Income Tax Starts in 2027
The budget adds a high-income surtax in three stages, alongside a new child tax credit and expanded Social Security relief.
Rhode Island taxpayers with more than $1 million of taxable income face a new state income tax surcharge beginning January 1, 2027. The additional rate starts at 1%, rises to 2% in 2028, and reaches 3% in 2029. Only income above the applicable threshold is subject to the surcharge.
Governor Daniel McKee signed the change into law on June 12 as part of the fiscal year 2027 budget. With the first tax year approaching, the Rhode Island Division of Taxation's guidance explains how the phase-in will work. The new surtax does not apply to 2026 income.
How the Rhode Island Millionaire Tax Phases In
The individual surtax threshold starts at $1 million in 2027 and is indexed for inflation for later years. It is the same for single filers, heads of household, married couples filing jointly, and married taxpayers filing separately. A joint return does not receive a $2 million threshold. The table below shows how the surtax adds to the existing 5.99% top rate as it phases in from 2027 through 2029. The combined rate applies only to the portion of taxable income above the surtax threshold.
| Tax Year | Additional Surtax | Combined Top Rate |
|---|---|---|
| 2026 | None | 5.99% |
| 2027 | 1.00% | 6.99% |
| 2028 | 2.00% | 7.99% |
| 2029 onward | 3.00% | 8.99% |
The law calls the additional charge a high-income surtax. The threshold applies to Rhode Island taxable income after applicable state adjustments and deductions. Owning assets worth $1 million does not by itself trigger the surtax.
What the First Year Could Cost
For a Rhode Island resident with $1.2 million of taxable income in 2027, the surtax applies to the $200,000 above the $1 million threshold. At 1%, that adds $2,000 before credits. At $2 million of taxable income, the additional tax is $10,000. The same calculation applies to married couples filing jointly based on their combined taxable income, whether the spouses earn equal or different amounts.
Those figures isolate the new surtax rather than the entire state tax bill. The calculation of total state income tax due would account for the underlying tax brackets, applicable deductions, and any state tax credits. For later years, the surtax calculation will use the higher rate and the inflation-adjusted income threshold.
Why State Leaders Included the Millionaire Tax
In his June signing announcement, Governor McKee tied the millionaire tax to protecting residents from federal safety-net cuts. His office pointed to funding for Medicaid and SNAP administration, hospitals, and social and human services. McKee described the budget's aims as “delivering affordability, protecting vulnerable residents from harmful federal cuts.”
The General Assembly also explained why lawmakers chose a gradual increase. Its budget announcement said the tax would rise as federal H.R. 1 changes affect the state more acutely, while allowing Rhode Island to gather information about the tax's effects. That is the legislature's stated rationale for the three-year rollout.
Tax Relief for Lower and Middle Income Residents
The budget also includes relief for eligible lower and middle income residents. The Rhode Island Division of Taxation identifies two changes beginning with the 2027 tax year:
- Child tax credit: A new refundable credit starts at $330 for each qualifying child age 18 or younger claimed on an eligible resident's return. Income limits reduce the credit for higher earners, and the law provides inflation adjustments.
- Social Security relief: Taxpayers no longer have to reach full retirement age to qualify for the state's Social Security income subtraction. The income limits remain, so the change does not exempt everyone's benefits.
Review the 2027 Rhode Island income tax return instructions when available for eligibility requirements and details on claiming these benefits.
Prepare for the 2027 Tax Year
The Division of Taxation says withholding tables and estimated-payment forms and instructions will be updated to reflect the surtax for 2027. Taxpayers expecting taxable income above the threshold should account for the additional tax when planning their 2027 paycheck withholding and estimated tax payments. Calendar-year taxpayers will generally report that income on returns filed in 2028.
For the current brackets, deduction details, and worked tax examples, see our Rhode Island income tax rates and brackets page. Our Rhode Island income tax forms page provides links to available returns and instructions.
References:
- 2026 H 7127 Substitute A as Amended: Fiscal Year 2027 Budget. Article 6, Sections 4-5. High-income surtax, inflation adjustments, child tax credit, and Social Security income modification. Rhode Island General Assembly. Signed June 12, 2026. Retrieved September 30, 2026.
- Summary of Legislative Changes. July 22, 2026, pages 3-6. Enacted surtax schedule, withholding guidance, Social Security relief, and child tax credit. Rhode Island Department of Revenue, Division of Taxation. Retrieved September 30, 2026.
- Governor McKee Signs Fiscal Year 2027 Budget, Advancing Key Affordability for All Initiatives. June 12, 2026. Signing announcement and the governor's stated reasons for the budget and millionaire tax. Office of Governor Dan McKee. Retrieved September 30, 2026.
- 2027 State Budget Bill Enacted. June 12, 2026. Legislative explanation of the phased-in tax and related individual relief. Rhode Island General Assembly. Retrieved September 30, 2026.