{"id":184825,"date":"2025-09-19T09:21:48","date_gmt":"2025-09-19T15:21:48","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=184825"},"modified":"2025-09-19T09:21:51","modified_gmt":"2025-09-19T15:21:51","slug":"as-rhode-islands-taylor-swift-tax-on-vacation-homes-spreads-heres-what-short-term-rental-owners-need-to-know","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/as-rhode-islands-taylor-swift-tax-on-vacation-homes-spreads-heres-what-short-term-rental-owners-need-to-know","title":{"rendered":"As Rhode Island’s \u201cTaylor Swift Tax\u201d on Vacation Homes Spreads, Here’s What Short-Term Rental Owners Need to Know"},"content":{"rendered":"\n

Short-term landlords might <\/span>not be able<\/span> to <\/span>sh-sh-shake it<\/span> of<\/span><\/em>f <\/span>when it comes to<\/span> the additional taxes they may be liable for.<\/span> This follows the introduction of Rhode <\/span>Island’s<\/span> “<\/span>Taylor Swift tax,<\/span>” <\/span>the nickname given to part-time residents who own vacation rentals. <\/span><\/p>\n\n\n\n

With other states following suit, tensions are escalating between local municipalities, brokers, agents, and the wealthy property owners they represent.<\/span><\/p>\n\n\n\n

What is the Taylor Swift Tax?<\/span><\/h2>\n\n\n\n

The so-called Taylor Swift tax\u2014officially known as the Non-Owner-Occupied Property Tax Act\u2014will take effect <\/span>on July 1, 2026<\/span>. It imposes an annual surcharge on non-primary residences (i.e., homes not occupied by their owners or tenants for at least 183 days a year) that <\/span>are valued<\/span> at more than $1 million.<\/span><\/p>\n\n\n\n

The surcharge <\/span>is set<\/span> at $2.50 for every $500 of assessed value above that threshold. Using these metrics,<\/span> Kiplinger<\/span><\/a> calculated that a $3 million property would face a surcharge of approximately $10,000 annually, in addition to regular <\/span>property taxes<\/span><\/a>.<\/span><\/p>\n\n\n\n

The tax was named after the pop superstar because Swift purchased a mansion in the upscale Watch Hill section of Rhode Island in 2013, where she is a part-time resident. <\/span>It’s<\/span> estimated<\/span> that she will be liable for an extra $136,000 annually when the new tax takes effect.<\/span><\/p>\n\n\n\n

Proponents and Opponents<\/span><\/h2>\n\n\n\n

The goal of the additional levy, according to the state, is to<\/span> raise revenue that supports housing initiatives<\/span><\/a> while reducing the number of residences that remain vacant for much of the year. In the case of short-term landlords, this could be devastating to their bottom line, as they would not only <\/span>be taxed<\/span> on the revenue they make as a landlord, but also from the Taylor Swift tax <\/span>too<\/span>, if they rent the home for more than 183 days a year but not as a long-term rental.<\/span><\/p>\n\n\n\n

The new tax has not been <\/span>well received<\/span> by many within the real estate industry.<\/span> “<\/span>These are people who just come here for the summer, spend their money, and pay their fair share of taxes,<\/span>” <\/span>Donna Krueger-Simmons, sales agent with Mott & Chace <\/span>Sotheby’s<\/span> International in Watch Hill, Rhode Island, told<\/span> CNBC<\/span><\/a>.<\/span> “<\/span>They’re<\/span> getting penalized just because they also live somewhere else<\/span>.”<\/span><\/p>\n\n\n\n

“<\/span>Y<\/span>ou’re<\/span> just hurting the people who support small business,<\/span>” <\/span>Lori Joyal of the Lila Delman Compass office in Watch Hill, told CNBC.<\/span> “<\/span>You’re<\/span> chasing away the people who spend most of the money in these towns<\/span>.”<\/span><\/p>\n\n\n\n

Brokers fear that the tax could backfire on vacation homeowners, who might choose to spend their money on nearby vacation towns with less stringent tax laws.<\/span><\/p>\n\n\n\n

Other States Are Implementing Similar Taxes<\/span><\/h2>\n\n\n\n

Montana<\/span><\/strong><\/p>\n\n\n\n

Montana recently passed reforms set to take effect in 2026, which similarly distinguish between primary residences and long-term rentals versus secondary\/vacation homes and short-term rentals. The state experienced an influx of new residents from New York and other major cities during the COVID-19 pandemic.<\/span><\/p>\n\n\n\n

Montana’s<\/span> new system 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. However, homes used as primary residences or for long-term rentals can qualify for lower, tiered rates, depending on market values, according to the<\/span> Montana Department of Revenue<\/span><\/a>.<\/span><\/p>\n\n\n\n

There are caveats to <\/span>Montana’s<\/span> program. Homeowners who live in their residences for at least seven months of the year, or have long-term rentals, may qualify for reduced rates and a one-time rebate for 2025, according to tax compliance site<\/span> Avalara<\/span><\/a>. The site also estimates that second homes and higher-value properties will bear a greater percentage of the tax burden due to their higher tax rates.<\/span><\/p>\n\n\n\n

Cape Cod, Massachusetts<\/span><\/strong><\/p>\n\n\n\n

Cape Cod is considering joining nearby Rhode Island in taxing affluent part-time residents. However, rather than an annual tax, Cape Cod will apply a<\/span> “<\/span>mansion tax<\/span>” <\/span>in the form of a<\/span> 2% real estate transfer tax<\/span><\/a> on sales of over $2 million. Proponents argue that it could generate around $56 million annually for affordable and year-round housing.<\/span><\/p>\n\n\n\n

Rob Brennan, chief legal officer at the nonprofit organization Housing Assistance, told<\/span> Cape <\/span>Cod’s<\/span> local government website<\/span><\/a>: <\/span><\/p>\n\n\n\n

“T<\/span>his is no longer a cyclical shortage\u2014<\/span>it’s<\/span> an existential crisis. Without a permanent, predictable source of funding, we cannot support housing that working Cape Codders can actually afford. <\/span>There’s<\/span> no way out of this crisis without bold, systemic solutions. The $2,000,000 home becoming $2,040,000 <\/span>doesn’t<\/span> stop second-home buyers<\/span>.”<\/span><\/em><\/p>\n\n\n\n

Conversely, full-time residents in Chatham, Cape Cod, will receive a 35% property tax exemption as of July 1, 2026.<\/span><\/p>\n\n\n\n

“T<\/span>he vast amount of wealth in this town in residential property <\/span>is held<\/span> by a disproportionate number of people who <\/span>aren’t<\/span> residents of this town,<\/span>” <\/span>Chatham community board member Seth Taylor told the<\/span> Cape Cod Chronicle<\/span><\/a><\/em>.<\/span> “<\/span>I <\/span>don’t<\/span> think <\/span>it’s<\/span> too much to ask to look at this as a realistic way to help the middle-income folks that we say we want to have in our community.<\/span>” <\/span><\/p>\n\n\n\n

Chatham and 10 other communities on the Cape and islands, as well as six other cities and towns across the state, including Boston, have adopted a residential tax exemption.<\/span><\/p>\n\n\n\n

California<\/span><\/strong><\/p>\n\n\n\n

Los <\/span>Angeles’<\/span> “<\/span>mansion tax,<\/span>” <\/span>known as Measure ULA, imposes a 4% transfer tax on property<\/span> sales between $5 million and $10 million, and a 5.5% tax on sales above $10 million<\/span><\/a> to support affordable housing and homeless prevention programs. However, the tax has recently been under scrutiny and could <\/span>be eliminated<\/span> to encourage development.<\/span><\/p>\n\n\n\n

“I<\/span>t <\/span>was sold<\/span> as a mansion tax, which means big houses for rich people, but it actually had a chilling effect on housing construction, particularly apartments,<\/span>” <\/span>former Assembly Speaker Bob Hertzberg, who <\/span>was tapped by Mayor Karen Bass<\/span> to work out the details of the legislative proposal, told the<\/span> Los Angeles Times<\/span><\/a><\/em>.<\/span><\/p>\n\n\n\n

Things Short-Term Rental Owners Should Keep In Mind<\/span><\/h2>\n\n\n\n

If you own a short-term rental in states like Rhode Island or Montana, you will need to pay particular attention to:<\/span><\/p>\n\n\n\n