Rhode Island State Income Tax Rates and Brackets for 2025 Explained

Key Takeaways

• Rhode Island updated 2025 state income tax brackets with inflation adjustments and no tax rate changes.
• Pension and annuity income exemption more than doubled to $50,000 individual, $100,000 joint filers in 2025.
• Employers must use new withholding tables from January 1, 2025; 3% surtax starts in 2026 for income over $430,000.

Rhode Island has officially updated its state income tax rates and brackets for the 2025 tax year, bringing several important changes that will affect residents, workers, retirees, and employers across the state. These updates reflect both routine inflation adjustments and new legislative measures designed to provide tax relief for certain groups, especially retirees. Here’s a detailed breakdown of what’s changed, who is affected, when these changes take effect, what actions are required, and what these updates mean for anyone with pending tax matters or planning for the future.

Summary of What Changed for 2025

The Rhode Island Division of Taxation has published the official state income tax rates and brackets for 2025, effective for all tax returns filed for the 2025 tax year. The main changes include:

• Adjusted tax brackets: The income thresholds for each tax bracket have increased to account for inflation.
• Increased pension and annuity income exemption: The amount of pension and annuity income that can be excluded from taxable income has more than doubled for most filers.
• Updated employer withholding tables: Employers must use new tables to ensure correct state income tax withholding from employee paychecks.
• No change to the basic tax rates: The three main tax rates (3.75%, 4.75%, and 5.99%) remain the same, but the income ranges they apply to have shifted.
• Upcoming surtax for high earners: While not affecting 2025, a new 3% surtax on very high incomes will begin in 2026.

Let’s look at each of these changes in detail, explain who is affected, and outline the steps you may need to take.

Rhode Island State Income Tax Rates and Brackets for 2025

For the 2025 tax year, Rhode Island’s state income tax rates and brackets are as follows:

• 3.75% on taxable income from $0 to $79,900
• 4.75% on taxable income from $79,900 to $181,650
• 5.99% on taxable income over $181,650

Here’s how the tax is calculated for each bracket:

• If your taxable income is up to $79,900, you pay 3.75% of your taxable income.
• If your taxable income is between $79,900 and $181,650, you pay a base tax of $2,996.25 plus 4.75% on the amount over $79,900.
• If your taxable income is over $181,650, you pay a base tax of $7,587.88 plus 5.99% on the amount over $181,650.

These brackets have been adjusted for inflation. For example, the lowest bracket now covers income up to $79,900, up from $77,450 in 2024. The top bracket now starts at $181,650, up from $176,050 the previous year. This adjustment helps prevent “bracket creep,” where inflation pushes taxpayers into higher tax brackets even if their real income hasn’t increased.

Who Is Affected by These Changes?

These updates impact several groups:

• All Rhode Island residents who file state income tax returns for 2025
• Nonresidents who earn income in Rhode Island and must file a state return
• Employers who withhold state income tax from employee wages
• Retirees who receive pension or annuity income
• High-income earners who may be affected by the upcoming surtax in 2026

Let’s break down how each group is affected.

Residents and Nonresidents

Anyone who lives in Rhode Island or earns income in the state will use these new brackets when filing their 2025 state income tax return. The changes mean that some people may see a slight decrease in their tax bill if their income has not kept pace with inflation, since the brackets now start at higher income levels.

Employers

Employers must use the updated withholding tables starting January 1, 2025. These tables are designed to match the new tax brackets and rates, ensuring that the correct amount of state income tax is withheld from employee paychecks throughout the year. Failure to use the new tables could result in under- or over-withholding, which can cause problems for both employers and employees at tax time.

Retirees

One of the most significant changes for 2025 is the increase in the Pension and Annuity Income Modification exemption. Starting January 1, 2025:

• Individual filers can exclude up to $50,000 of pension and annuity income from their Rhode Island taxable income (up from $20,000).
• Married couples filing jointly can exclude up to $100,000 (up from $40,000).

This change means that many retirees will see a lower state tax bill, as a larger portion of their retirement income is now exempt from Rhode Island income tax. This is especially important for those living on fixed incomes.

High-Income Earners

While the 2025 rates do not include any new surtax, it’s important to note that starting in 2026, Rhode Island will impose an additional 3% tax on taxable income over $430,000 (with this threshold also adjusted for inflation each year). This does not affect 2025 returns, but high earners should plan ahead for this change.

Effective Dates

• January 1, 2025: All new tax brackets, rates, and pension income exemptions take effect for the 2025 tax year.
• January 1, 2025: Employers must start using the updated withholding tables.
• January 1, 2026: The new 3% surtax on taxable income over $430,000 takes effect (for tax year 2026).

Required Actions for Taxpayers and Employers

To comply with the new Rhode Island state income tax rates and rules for 2025, here’s what you need to do:

For Individual Taxpayers:

• Check your expected taxable income for 2025 and see which bracket you fall into using the new thresholds.
• If you receive pension or annuity income, make sure to claim the increased exemption when you file your 2025 state tax return.
• Adjust your estimated tax payments if you make quarterly payments, to reflect the new brackets and pension exemption.
• Keep records of your income and any pension or annuity statements to support your exemption claim.

For Employers:

• Download and use the updated withholding tables from the Rhode Island Division of Taxation website starting January 1, 2025.
• Update payroll systems to ensure correct withholding for all employees.
• Communicate with employees about the changes, especially if their take-home pay changes due to new withholding amounts.

For Retirees:

• Review your pension and annuity income to determine how much will be exempt under the new rules.
• Consult with a tax professional if you’re unsure how the exemption applies to your specific situation.

For High-Income Earners:

• Plan ahead for 2026 if your taxable income may exceed $430,000, as the new surtax will increase your state tax bill starting that year.

Implications for Pending Applications and Ongoing Tax Matters

If you have a pending tax return, amended return, or are in the process of resolving a tax issue with the Rhode Island Division of Taxation, these changes may affect your situation if your case involves the 2025 tax year or later. For example:

• Pending returns for 2024 or earlier: These changes do not apply. Use the brackets and rules in effect for those years.
• Returns for 2025: Use the new brackets, rates, and pension exemption amounts.
• Installment agreements or payment plans: If your payments are based on estimated future tax liability, recalculate using the new rates and exemptions for 2025 and beyond.

If you’re unsure how these changes affect your pending application or tax matter, contact the Rhode Island Division of Taxation directly for guidance.

Background and Historical Context

Rhode Island’s approach to state income tax has evolved over the years. Since 2016, the state has used a uniform tax rate schedule that applies the same rates and brackets to all filers, regardless of whether they file as single, married, or head of household. This system is designed to be simple and fair, with annual adjustments for inflation to ensure that taxpayers are not pushed into higher brackets simply because of rising prices.

The pension and annuity income exemption was first introduced in 2016 to provide tax relief for retirees. Over time, the exemption amount has increased, reflecting the state’s commitment to supporting older residents on fixed incomes. The latest increase for 2025 is the largest yet, more than doubling the amount that can be excluded from taxable income.

The upcoming 3% surtax on high incomes is part of Rhode Island’s effort to raise additional revenue from the state’s wealthiest residents. This change, effective in 2026, is similar to measures adopted in other states to address budget needs and fund public services.

Expert Perspectives and Practical Guidance

Tax professionals and state officials recommend that all Rhode Island taxpayers take the following steps:

• Review the updated tax brackets and withholding tables to ensure you’re paying the correct amount throughout the year.
• Retirees should take full advantage of the increased pension and annuity exemption by keeping careful records and consulting with a tax advisor if needed.
• High-income earners should start planning now for the additional surtax in 2026, as it may affect financial planning, estimated tax payments, and investment decisions.
• Employers should update payroll systems promptly to avoid errors in withholding, which can lead to penalties or unhappy employees at tax time.

According to analysis by VisaVerge.com, these changes are expected to provide meaningful tax relief for many Rhode Island residents, especially retirees, while ensuring that the state’s tax system keeps pace with inflation and remains fair for all income levels.

Where to Find Official Information and Help

The Rhode Island Division of Taxation is the official source for all information about state income tax rates, brackets, exemptions, and withholding tables. You can find the latest updates, downloadable forms, and detailed instructions on their official website.

If you have questions or need help:

• Call the Division of Taxation at (401) 574-8829 during business hours (8:30 a.m. to 3:30 p.m.).
• Visit the public office if you need in-person assistance.
• Check the website for updates, calculators, and downloadable forms.

Key Takeaways and Next Steps

• Rhode Island’s state income tax brackets and rates for 2025 have changed, with higher income thresholds and a much larger pension and annuity exemption.
• Employers and taxpayers must use the new brackets and withholding tables for all income earned in 2025.
• Retirees benefit most from the increased pension exemption, which can lower their state tax bill.
• A new surtax on very high incomes takes effect in 2026, so high earners should plan ahead.
• Official resources are available from the Rhode Island Division of Taxation for anyone needing help or clarification.

By staying informed and taking the right steps now, Rhode Island residents and employers can make sure they comply with the new rules, avoid surprises at tax time, and take full advantage of the tax relief measures now in place for 2025.

Learn Today

Tax Brackets → Income ranges that determine the tax rate applied to taxpayers’ taxable income in a progressive tax system.
Pension and Annuity Exemption → The income amount from pensions or annuities excluded from taxable income for state tax purposes.
Withholding Tables → Employer guides that determine the amount of state tax to withhold from employees’ paychecks.
Surtax → An additional tax applied on top of existing taxes, here targeting high-income earners starting 2026.
Bracket Creep → When inflation pushes taxpayers into higher tax brackets without real income growth, increasing tax burden.

This Article in a Nutshell

Rhode Island’s 2025 tax updates raise income bracket thresholds for inflation, doubling pension exemptions. Employers update withholding tables, retirees benefit most. A 3% surtax on high incomes starts in 2026. These changes ensure fair tax payments and relief, highlighting the state’s commitment to supporting residents amid economic shifts.
— By VisaVerge.com