Understanding the Transfer Tax & Out of State Seller Withholding Fee 

If you’re planning to sell a home in Rhode Island, there are two costs that sellers often don’t fully understand until closing day — and by then, it can feel stressful or confusing.

One fee applies to every seller.
The other only applies if you live out of state.

I believe in explaining both early, so you can make informed decisions and avoid last-minute surprises. Your real estate attorney and CPA should always be part of the conversation, but this overview will help you understand what’s coming.

1. Rhode Island Transfer Tax (a.k.a. Tax Stamps)

Applies to all sellers

When a property sells in Rhode Island, the state collects a transfer tax when the deed is recorded. This is sometimes referred to as “tax stamps.”

Important update:

As of October 1, 2025, Rhode Island increased the transfer tax.

Current rate:

• $7.50 per $1,000 of the sale price

• Typically paid by the seller

• Collected at closing

Example:

If your home sells for $600,000:

• Transfer tax = $4,500

This is a real, unavoidable cost, and I always include it in the Seller Net Sheet I prepare for clients so you can see your estimated bottom line before we ever list.

Additional Transfer Tax for Homes Over $800,000

If your home sells for more than $800,000, there’s an additional layer to be aware of.

How it works:

• The first $800,000 of the sale price is taxed at $7.50 per $1,000

• Any amount above $800,000 is taxed at an additional $7.50 per $1,000

• That means the portion above $800,000 is effectively taxed at $15 per $1,000

Example:

Sale price: $900,000

• First $800,000:

  • $7.50 per $1,000 = $6,000

• Remaining $100,000:

  • Base tax = $750

  • Additional tax = $750

• Total transfer tax: $7,500

This matters for pricing strategy and net proceeds, especially for sellers in higher price brackets, and it’s something I walk through carefully with my clients.

2. 6% Withholding for Out-of-State Sellers

Only applies if you are not a Rhode Island resident

If you do not live in Rhode Island at the time of sale, the state requires a 6% withholding of the gross sale price at closing.

This is one of the most misunderstood parts of a Rhode Island transaction.

The key thing to know:

This is not an extra tax.
It is a prepayment toward any potential Rhode Island capital gains tax.

How it works:

• 6% of the sale price is withheld at closing

• The funds are sent to the State of Rhode Island

• After the sale, you file a Rhode Island tax return

• If you overpaid, you receive a refund

• If you owed additional tax, the withholding is applied toward it

Example:

Sale price: $600,000
6% withholding: $36,000

That money is temporarily held, not automatically lost.

Because this amount often comes back partially or in full depending on your situation, I do not include the 6% withholding in my Seller Net Sheet. Instead, I flag it early and make sure sellers are prepared to review it with their attorney or CPA.

Why I Talk About This Early

• The transfer tax is a known, real cost

• The additional tax over $800K can meaningfully affect net proceeds

• The 6% withholding can look alarming if no one explains it in advance

My role is to make sure you:

• Understand what applies to your situation

• Have realistic expectations about proceeds

• Aren’t blindsided at the closing table

Your real estate attorney is the right person to confirm how these apply to your specific circumstances and to handle any filings, exemptions, or refunds.

Thinking About Selling?

If you’re considering selling — especially if:

• Your home may sell over $800,000, or

• You live out of state

I strongly recommend reviewing these items early as part of your planning.

I’m always happy to prepare a Seller Net Sheet, talk through pricing strategy, and connect you with trusted local attorneys so the process is clear and smooth from start to finish.

If you’d like help understanding what selling would look like for your property, reach out! I'm always here to help!