Allows a modification for up to $50,000 of individual retirement account income that is included in federal adjusted gross income for the taxable year; provided that the person with individual retirement accounts has no income from pensions.

Rhode Island IRA Tax Relief Bill

This bill would allow certain Rhode Island retirees to exclude up to $50,000 of income drawn from Individual Retirement Accounts (IRAs) from their Rhode Island state income taxes. Normally, when someone withdraws money from a traditional IRA, that money counts as taxable income at both the federal and state level. This bill would let qualifying residents subtract up to $50,000 of that IRA income when calculating what they owe Rhode Island in state taxes, potentially lowering their overall tax bill.

There is an important condition, however: this tax break would only be available to people who do not receive pension income. In other words, if a retiree already collects income from a traditional pension plan, they would not be eligible for this IRA deduction. This means the benefit is specifically targeted at retirees who saved for retirement through IRAs rather than through employer-sponsored pension plans.

This bill would primarily affect Rhode Island residents who are retired or drawing down their IRA savings and rely on those funds as a primary source of retirement income. For someone withdrawing $50,000 or more from an IRA annually, the savings could be meaningful — depending on their tax bracket, they could save several hundred to a few thousand dollars per year on their state taxes. The bill has been introduced and referred to the Senate Finance Committee, where it will be reviewed before any further action is taken.