Rhode Island
A 1031 exchange in Rhode Island requires a state filing 20 days before closing.
Rhode Island withholds 6% from a nonresident seller's net proceeds unless the Division of Taxation has approved a gain-based certificate, and for an exchange the regulation says the election must be filed even though no tax may be due.
If you do not live in Rhode Island and you sell Rhode Island real estate, the buyer has to withhold 6% of your net proceeds (7% for a corporation) unless you present an approved Certificate of Withholding Due at closing. For a 1031 exchange, the Division of Taxation's regulation says the seller must still file the Election to Have Withholding Based on Gain, even though no withholding may be due, and the Division needs it at least 20 days before closing. The form asks for the intermediary's name, address and phone number.
onezero3one acts as qualified intermediary for exchanges of Rhode Island property, subject to a review of each file before an exchange agreement is signed. We work with your closing agent and tax advisor; we do not give tax or legal advice.
What is specific to this state
The federal rules in IRC §1031 decide whether an exchange qualifies. The items below are state requirements that sit alongside them at closing or on the return. Each links to the official source it was checked against; confirm the current version with your closing agent and tax advisor before relying on it.
| Issue | What applies | Usually handled by | Source |
|---|---|---|---|
| Tax at closing for sellers | When a nonresident sells Rhode Island real estate the buyer must withhold 6% (7% if the seller is a nonresident corporation) and pay it to the Division of Taxation within three banking days after closing. The buyer is liable for the amount, which is a lien on the property until paid. Without an approved certificate the base is net proceeds. Nonresident sellers (individuals, estates, trusts, partnerships, corporations) of Rhode Island real estate; an LLC taxed as a partnership is 6% and as a corporation 7%. | Seller, with the closing agent filing at recording | Rhode Island Division of Taxation, 280-RICR-20-10-1, sections 1.6 and 1.10 (active version eff. 01/04/2022) Checked September 30, 2026 |
| Election required even if no tax is due | Where a nonresident's sale will not be subject to tax under IRC 1031 (or 121, 721, 1033, 408), the regulation requires the seller to make the gain election and file the Election even though no withholding need be made. If the seller later fails to comply with the Internal Revenue Code section, the seller acknowledges an obligation to file an original or amended Rhode Island return for the year of sale. Nonresident sellers relinquishing Rhode Island real estate in a 1031 exchange. | Seller files the Election; closing agent confirms the approved certificate | Rhode Island Division of Taxation, 280-RICR-20-10-1, section 1.7(G) (active version eff. 01/04/2022) Checked September 30, 2026 |
| 20-day deadline for the election | The seller must submit the completed Election to Have Withholding Based on Gain to the Division at least 20 days before closing, and an approved Certificate of Withholding Due is sent to the seller or designee. The election is binding; failing to make it at least 20 days before closing results in withholding based on net proceeds, and with several sellers all must elect or net proceeds is used. The Division cannot process an election if closing occurred before it was submitted. Nonresident sellers who want withholding based on gain (including 1031 sellers). | Seller, with the closing agent confirming the approved certificate at closing | Rhode Island Division of Taxation, 280-RICR-20-10-1, section 1.7(D); General Instructions Rev. 09/2020 Checked September 30, 2026 |
| What the form asks about the intermediary | On the Election form, the box 'This sale will not be subject to tax under IRC Section 1031 - Like Kind Exchange' asks for the name, address and phone number of the intermediary. The instructions say these are required for this type of transaction, and the deferred gain is entered on line 6. 1031 sellers completing the Election (Form RI 71.3 Election, Rev. 09/2020). | Seller; intermediary supplies its details | Rhode Island Division of Taxation, General Instructions, Sale of Rhode Island Real Estate by Nonresidents (Rev. 09/2020) Checked September 30, 2026 |
| Buyer filings even at zero | With an approved certificate, the buyer completes the Remittance of Withholding Due form, attaches the certificate, encloses any payment, and files it with two completed Discharge of Lien forms. A remittance form must be filed even if zero is due, after which the Division issues a discharge of lien to the buyer. Buyers and closing agents in a nonresident sale. | Buyer or closing agent | Rhode Island Division of Taxation, General Instructions (Rev. 09/2020) Checked September 30, 2026 |
| Conveyance tax on the deed | Rhode Island's real estate conveyance tax applies when consideration exceeds $100. Since October 1, 2025 the rate is $3.75 per $500 (or fraction) on the entire consideration, with an additional $3.75 per $500 on the part of a residential sale above $800,000 (threshold inflation-adjusted from January 1, 2026). Every Rhode Island deed, including both deeds in an exchange. | Closing agent, under the contract's allocation | Rhode Island Division of Taxation, ADV 2025-13 (August 21, 2025); R.I. Gen. Laws 44-25-1 Checked September 30, 2026 |
| Who pays and exchange exemption | Absent an agreement to the contrary, the grantor pays the conveyance tax. The exemptions in 44-25-2 (security instruments, government grantors, a specified Providence project, resident-owned manufactured home communities, state acquisitions, certain affordable-housing entity transfers) do not mention exchanges. Sale and purchase deeds in a Rhode Island exchange. | Closing agent, under the contract's allocation | R.I. Gen. Laws 44-25-1 and 44-25-2 Checked September 30, 2026 |
Withholding on nonresident sellers
When a nonresident sells Rhode Island real estate, the buyer must deduct and withhold 6% if the seller is an individual, estate, partnership or trust, and 7% if the seller is a corporation. Without an approved certificate, the base is the seller's net proceeds. The buyer must pay the amount to the Division of Taxation within three banking days after closing, and is liable for it. Until it is paid, the amount is a lien on the property, subordinate to any lender's mortgage other than one granted by the seller.
An LLC taxed as a partnership is withheld at 6%, and one taxed as a corporation at 7%.
Two ways to compute the withholding
| Method | How it works | Effect on a 1031 exchange |
|---|---|---|
| Gain method | The seller files the Election to Have Withholding Based on Gain, with a Certificate of Withholding Due in duplicate, at least 20 days before closing. The Division approves the certificate, and the seller presents it at closing. | The deferred gain is entered as unrecognized gain on the form, so the withholding is calculated on the gain that is not deferred, which may be zero. |
| Net proceeds method | If there is no approved certificate at closing, the buyer withholds 6% of net proceeds (7% for a corporation). | Part of the money meant for the exchange is held back and has to be recovered through a Rhode Island return. |
The 20-day election and the intermediary
The regulation says that where a nonresident's sale will not be subject to tax under sections 121, 721, 1031, 1033 or 408 of the Internal Revenue Code, the seller must make the gain election and file the Election form even though no withholding need be made. The election is binding on the seller, and failing to make it at least 20 days before closing results in withholding based on net proceeds. With more than one seller, all must elect the gain method or the net proceeds method is used.
On the Election form there is a box for "IRC Section 1031 - Like Kind Exchange" that asks for the name, address and phone number of the intermediary. The Division's instructions say these are required for this type of transaction. The unrecognized gain goes on line 6, and the form includes the expected closing date. The Division cannot process an election if closing took place before the form was submitted.
The Election form carries an acknowledgment that if the nonrecognition section does not ultimately apply, the seller must file a Rhode Island return for the year of sale. The regulation says the same: if the seller later fails to comply with the Internal Revenue Code section, the seller must file an original or amended Rhode Island return.
What the buyer and closing agent file
With an approved certificate in hand, the buyer completes the Remittance of Withholding Due form, attaches the certificate, encloses any payment, and files it with the Division together with two completed Discharge of Lien forms. A remittance form must be filed even if zero is due. The Division then issues a discharge of lien to the buyer. Ask your closing agent to confirm they have the approved certificate before closing.
Conveyance tax on each deed
Rhode Island's real estate conveyance tax applies when the consideration exceeds $100. Since October 1, 2025, the rate is $3.75 per $500 or fraction of the consideration paid, on the whole price. A second tier of $3.75 per $500 applies to the part of a residential sale above $800,000, a threshold that is adjusted for inflation from January 1, 2026. In the absence of an agreement to the contrary, the grantor (the person conveying the property) pays it.
The exemptions in section 44-25-2 cover items such as instruments securing a debt, deeds from governments, and certain affordable-housing and manufactured-home-community transfers. They do not mention exchanges, so plan for the tax on both your sale deed and your purchase deed.
Timeline for a nonresident's Rhode Island sale
- At least 20 days before closing: the seller submits the Election and certificate to the Division, with the intermediary's name, address and phone number on the form.
- At closing: the seller presents the approved Certificate of Withholding Due to the buyer; the contract is assigned and the buyer notified; proceeds go to the intermediary.
- Within three banking days of closing: the buyer files the Remittance and the Discharge of Lien forms with any payment due.
- Day 45 and day 180: identification and purchase, as in any exchange. The deadline calculator gives both dates.
Questions Rhode Island sellers ask
I live in Massachusetts and am selling a Rhode Island rental through a 1031. Do I still file something with Rhode Island?
Yes. The regulation requires the Election to Have Withholding Based on Gain even if no withholding is due. File it at least 20 days before closing.
What does Rhode Island need about the intermediary?
The Election form asks for the intermediary's name, address and phone number when the 1031 box is checked.
What happens if I miss the 20 days?
The buyer withholds 6% of your net proceeds (7% for a corporation) at closing. You then recover what you can through your Rhode Island return.
Is the conveyance tax waived for an exchange?
The statutory exemption list does not include exchanges. Absent a contrary agreement, the grantor pays.
Related
Sources
- 280-RICR-20-10-1 Withholding Tax on the Sale of Real Property by Nonresidents (active, eff. 01/04/2022) (checked September 30, 2026)
- Rhode Island Division of Taxation, Nonresident Real Estate Withholding Forms (checked September 30, 2026)
- General Instructions, Sale of Rhode Island Real Estate by Nonresidents (Rev. 09/2020) (checked September 30, 2026)
- Form RI 71.3 Election to Have Withholding Based on Gain and Certificate (Rev. 09/2020) (checked September 30, 2026)
- ADV 2025-13 Real Estate Conveyance Tax Increases as of October 1, 2025 (checked September 30, 2026)
- R.I. Gen. Laws 44-25-1 and 44-25-2 (checked September 30, 2026)
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