All income, including wages, salaries, and tips, is subject to tax in Rhode Island. Additionally, it taxes capital gains, dividends, and interest. The state levies income taxes at a rate between 3.75% and 5.99%. Additionally, Rhode Island has a sales tax that is 7%, greater than Massachusetts’ 6.25%.
If you live in one state and work in another, you may be subject to taxation in both states on the same income. However, tax reciprocity agreements between most states stop double taxation. Unfortunately, there is no tax reciprocity agreement between Massachusetts and Rhode Island. This implies that you must pay income taxes to both states if you live in Rhode Island and work in Massachusetts. In Massachusetts, you’ll need to file a nonresident tax return, and in Rhode Island, you’ll need to file a resident tax return.
Rhode Island does not have the lowest taxes for seniors. Rhode Island taxes social security benefits and retirement income. There is a $15,000 exemption for retirement income provided by the state, but it is only available to people 65 and older. Furthermore, Rhode Island levies inheritance taxes on estates valued more than $1.6 million, which may have an impact on retirees with sizable holdings.
In conclusion, Rhode Island has greater taxes than Massachusetts. In addition to having a higher sales tax rate, Rhode Island taxes all income, including interest, dividends, and capital gains. As Social Security benefits and retirement income are taxed, Rhode Island is not the most tax-friendly state for retirees. Since Massachusetts and Rhode Island don’t have a tax reciprocity agreement, you will have to pay income taxes to both states if you live in Massachusetts and work in Rhode Island. When choosing a location for your home and place of employment, it’s crucial to keep these things in mind.