As Rhode Island’s “Taylor Swift Tax” on Vacation Homes Spreads, Here’s What Short-Term Rental Owners Need to Know
Summary
Rhode Island and other states are implementing "mansion taxes" or property surcharges on non-primary residences, which will impact short-term rental owners. Hosts in these areas need to understand these new taxes and factor them into their profitability calculations. Be aware of residency requirements and tax liabilities in your area.
Key Insights
- •Cape Cod, Massachusetts is considering a 2% real estate transfer tax on sales of over $2 million, while Chatham, Cape Cod, is providing a 35% property tax exemption to full-time residents.
- •Rhode Island's Non-Owner-Occupied Property Tax Act, or "Taylor Swift tax," takes effect July 1, 2026, imposing an annual surcharge on non-primary residences valued over $1 million. The surcharge is $2.50 for every $500 of assessed value above that threshold.
- •Montana will require non-primary residents and short-term rental owners to pay a flat rate of 1.90% beginning in 2026, regardless of the property value, while primary residences and long-term rentals may qualify for lower, tiered rates.
Action Items
- ✓Weigh the income generated from the rental versus the tax payable to calculate the best use of your property.Effort: mediumImpact: medium
- ✓Keep records of residency use dates versus short-term and mid-term rental occupancy.Effort: lowImpact: medium
Common Mistakes
- ⚠Failing to understand and comply with these new taxes could negatively impact your bottom line.
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