Complete Guide to Rhode Island LLC Taxes in 2025
Rhode Island, the smallest state by area, packs a moderately heavy tax punch for LLC owners. With graduated income tax rates from 3.75% to 5.99%, a $400 minimum entity tax for multi-member LLCs, and a 7% state sales tax (one of the highest in New England), the Ocean State is not the cheapest option but offers proximity to major markets and a manageable compliance burden. This guide covers all aspects of RI LLC taxation.
How Rhode Island Taxes LLCs
Rhode Island treats LLCs as pass-through entities. Profits pass through to members who report on Form RI-1040. Multi-member LLCs file Form RI-1065 and face a $400 minimum annual tax.
Key Point: The $400 minimum tax applies to multi-member LLCs (taxed as partnerships) regardless of income level. Even an LLC with zero income owes $400. Single-member LLCs filing as disregarded entities are generally not subject to this minimum.
Rhode Island Income Tax Brackets (2025)
| Taxable Income | Tax Rate |
|---|---|
| $0 - $73,450 | 3.75% |
| $73,451 - $166,950 | 4.75% |
| Over $166,950 | 5.99% |
Federal Taxes for RI LLC Owners
- Self-Employment Tax (15.3%): Standard federal rates
- Federal Income Tax: 10% to 37% for 2025
- QBI Deduction: Up to 20% under Section 199A
Tax Tip: With RI's top rate at 5.99%, S-Corp election becomes valuable at lower income levels. Use our S-Corp Tax Calculator to evaluate savings.
RI LLC Filing Deadlines
| Filing Type | Deadline | Extension |
|---|---|---|
| Individual (RI-1040) | April 15 | October 15 |
| Partnership (RI-1065) | March 15 | September 15 |
| Annual Report | Feb 1 - May 1 | None |
| Estimated Payments | Apr 15, Jun 15, Sep 15, Jan 15 | None |
RI LLC Formation Costs
- Articles of Organization: $150
- Registered Agent: Required; $50-$150/year
- Annual Report: $50/year
- Minimum Entity Tax: $400/year (multi-member)
- EIN: Free from the IRS
RI vs. Neighboring States
| State | Income Tax | Annual Fee | Entity Tax |
|---|---|---|---|
| Rhode Island | 3.75-5.99% | $50 | $400 min |
| Massachusetts | 5% + 4% surtax | $500 | None |
| Connecticut | 3-6.99% | $80 | $250 min |
| New Hampshire | 0% income | $100 | BPT 7.5% |
Common RI LLC Tax Mistakes
- Forgetting the $400 minimum: Multi-member LLCs owe $400 even with zero income
- Missing the annual report window: Due between Feb 1 and May 1 -- unusual timing
- Ignoring estimated payments: RI penalizes underpayment
- Not evaluating S-Corp election: Can save on both SE tax and the $400 minimum
Understanding Rhode Island's Tax Landscape for LLCs
Rhode Island's tax system for LLC owners falls in the middle range among New England states. The graduated rates from 3.75% to 5.99% are lower than Massachusetts (5% + 4% millionaire surtax) but higher than nearby New Hampshire (which has no personal income tax but imposes a 7.5% Business Profits Tax). The $400 minimum entity tax for multi-member LLCs adds a fixed cost that smaller partnerships should factor into their planning.
One advantage of RI's system is its relative simplicity compared to neighboring states. There is no separate local income tax (unlike Pennsylvania and Ohio), no city business tax (unlike NYC), and no special industry surcharges. The three bracket system is easy to understand and plan around.
Rhode Island LLC Compliance Calendar
Maintaining a Rhode Island LLC requires attention to several key deadlines throughout the year:
- Annual Report: Filed between February 1 and May 1 each year ($50 fee). This unusual filing window starts earlier than most states and gives a three-month period for compliance.
- Individual Tax Return (RI-1040): Due April 15 for members reporting pass-through income.
- Partnership Return (RI-1065): Due March 15 for multi-member LLCs.
- Minimum Entity Tax ($400): Due with the partnership return for multi-member LLCs.
- Estimated Payments: Due April 15, June 15, September 15, and January 15.
- Sales Tax: Monthly returns due by the 20th of the following month for most filers.
The annual report's unusual February-May window is a common trip-up for LLC owners used to April or year-end deadlines. Setting a February calendar reminder ensures you don't miss the window.
Rhode Island's $400 Minimum Entity Tax Explained
The $400 minimum tax applies specifically to LLCs taxed as partnerships (multi-member LLCs). Single-member LLCs treated as disregarded entities are generally not subject to this minimum. This creates an important structural consideration: if you have a two-member LLC earning very little, you still owe $400 per year regardless of income.
For small partnerships, this minimum tax can be disproportionately high. A two-person LLC earning $10,000 each would pay $400 in minimum entity tax (4% effective rate at the entity level) on top of personal income taxes. In contrast, a single-member LLC earning the same amount would face no minimum tax. This makes single-member LLC structure particularly advantageous for small operations in Rhode Island.
The $400 minimum also creates a consideration when evaluating S-Corp election. S-Corps in Rhode Island face a $400 minimum corporate tax as well, but the SE tax savings from S-Corp election typically far outweigh this cost for LLCs earning above $50,000.
Rhode Island Sales Tax Considerations
Rhode Island's 7% sales tax rate is one of the highest base rates in the nation. For LLCs selling taxable goods or services, this requires registration with the RI Division of Taxation, collection at the point of sale, and regular remittance. RI does not impose local sales taxes, so the 7% rate is uniform statewide -- a simplification compared to states with varying local rates.
Key exemptions include clothing (items under $250), prescription medications, and food sold for off-premise consumption (groceries). Digital goods and SaaS products are generally taxable in Rhode Island, which is an important consideration for technology-based LLCs.
Retirement and Deduction Planning for RI LLC Owners
Rhode Island uses federal AGI as the starting point for state taxable income, with certain modifications. This means most federal deductions flow through to reduce your RI tax liability. Key strategies for RI LLC owners include:
- Retirement plan contributions: SEP-IRA, Solo 401(k), and SIMPLE IRA contributions reduce both federal and RI taxable income. At the 5.99% top rate, a $50,000 SEP-IRA contribution saves approximately $3,000 in RI taxes alone.
- Health insurance premiums: Self-employed health insurance deduction reduces AGI, benefiting both federal and state tax calculations.
- Home office deduction: Deductible for both federal and RI purposes.
- Business expense maximization: Every legitimate deduction reduces your RI liability at your marginal rate (up to 5.99%).
Rhode Island PTET and SALT Cap Workaround
Rhode Island offers a Pass-Through Entity Tax election that allows eligible LLCs to pay state income tax at the entity level. The PTET rate matches the individual rates (3.75%-5.99%), and members receive a corresponding credit. This effectively converts a non-deductible personal SALT payment into a deductible business expense, bypassing the $10,000 federal SALT cap.
For RI LLC owners with income above the standard deduction (where the SALT cap becomes relevant), the PTET election can produce meaningful federal tax savings. The election should be evaluated annually with your tax advisor to ensure it remains beneficial based on your specific income level and deduction situation.
Comparing Rhode Island to Other New England States
When evaluating Rhode Island for LLC formation, it helps to compare the total tax environment across New England:
Rhode Island's middle-ground position in New England makes it neither the cheapest nor most expensive option. The $400 minimum entity tax is a disadvantage for small partnerships, but the absence of local income taxes and a relatively simple compliance environment offset this. For LLC owners choosing between New England states, the decision often comes down to where they actually live and conduct business rather than pure tax optimization.