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Key Takeaways:
- Rhode Island’s “Taylor Swift Tax” adds new surcharges on second homes over $1 million, part of a wave of similar taxes across the U.S.
- Critics say the taxes may backfire by reducing home sales and pushing buyers to other states.
- This could also encourage those with capital on hand to invest in real estate as an alternative asset through platforms like First National Realty Partners or Arrived.
- Montana and California have implemented their own second-home or mansion tax policies, with others considering similar moves, meaning it could be a good time for HNWIs to look at their real estate portfolios using advisorial services like Range.
- Vacation home buyers should be aware of new and proposed taxes that could significantly increase long-term ownership costs.
First it was Rhode Island. Now it’s spreading to Montana, Massachusetts and beyond.
A growing number of states are targeting vacation homes with new taxes that aim to raise revenue and level the housing playing field, but not without backlash.
The “second home tax” or “Taylor Swift Tax” is pitched as a solution to widening housing inequality and strained state budgets. However, high-end real estate agents and some economists warn that this could discourage spending in local communities, drive away affluent homeowners and even reduce housing supply in the long run.
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Here’s what these new taxes do, who’s affected, and how buyers and second-home owners are already responding.
What is the ‘Taylor Swift Tax’?
Rhode Island’s newly enacted levy on second homes, dubbed the ‘Taylor Swift Tax’ [1] because of the pop star’s Watch Hill beach house, which is valued at nearly $30 million [2], went into effect this summer. Swift bought the lavish abode in 2013 for $17.75 million when she was just 23 years old.
Lawmakers are leveraging this new tax to try and address the housing affordability crisis. Rhode Island Senator Meghan Kallman told Newsweek [3] that Rhode Island’s current tax system is “upside-down.”
"By asking these owners to pay their fair share, Rhode Island can generate much-needed revenue and prevent cuts to essential services like healthcare and education," Kallman said.
The new surcharge applies to non-primary residences valued at over $1 million. For any home not occupied for at least 183 days a year, the state now charges $2.50 per $500 in assessed value above the $1 million mark. That’s in addition to existing property taxes.
For example, Swift’s Watch Hill home carried estimated property taxes of about $203,000 in 2024. The new fee would add around another $145,000 annually, raising her total property tax bill to roughly $348,000.
Real estate agents argue this unfairly penalizes part-time residents who already pay local taxes but don’t rely heavily on services like schools, police or sanitation. They also point out that these residents can sometimes be big spenders in local communities.
“These are people who just come here for the summer, spend their money and pay their fair share of taxes,” Donna Krueger-Simmons, a sales agent with Mott & Chace Sotheby’s International in Watch Hill, told CNBC [4]. “They’re getting penalized just because they also live somewhere else.”
In Swift’s case, this change amounts to a 42% increase in her property taxes on her Watch Hill home.
For some high earners, a change like this could raise the question of whether their money is being well spent, and if a second home is really worth the effort. One alternative to paying a $145,000 increase in taxes is to invest the money in another sector of real estate instead.
For instance, you could invest in commercial real estate with First National Realty Partners, which helps accredited individual investors with a minimum investment of $50,000 access institutional-quality commercial investments — all without the legwork of finding deals themselves.
FNRP has relationships with the nation’s largest essential-needs brands, such as Kroger, Walmart and Whole Foods. And since these retailers provide necessities, they tend to still perform well during tough times. Everyone needs groceries, after all.
If FNRP sounds like a better way of spending your money than on property taxes, you can engage with their experts, explore available deals and easily make an allocation, all in FNRP’s personalized portal.
Read more: US car insurance costs have surged 50% from 2020 to 2024 — this simple 2-minute check could put hundreds back in your pocket
Why states are targeting vacation homes
States with budget shortfalls see high-value second homes as an opportunity. These properties are typically owned by out-of-state buyers, require fewer public services and can generate significant tax revenue.
As home prices soar, resentment is mounting in local communities where full-time residents are being priced out. The combination of tight budgets and growing housing inequality has led to these new policies aimed at what lawmakers see as under-taxed wealth.
For example, Montana recently passed a tiered property tax plan that increases rates for second homes and short-term rentals while lowering rates for full-time residents. Properties worth more than four times the state’s median home price could see tax rates rise to 1.9%, compared to a base rate of 0.76%.
The Montana Department of Revenue expects the changes, which take effect in 2026, to raise second-home tax bills by an average of 68%. Valerie Johnson, a broker with PureWest Christie’s in Bozeman, says the changes won’t just affect newcomers. “These are small businesses for many people,” she explained, referring to long-time locals who rent out investment properties.
If you’re interested in the vacation rental market, but want to hedge your bets against changes to tax law, you could try investing in real estate with shares of vacation homes or rental properties through Arrived.
Backed by world-class investors, including Jeff Bezos, Arrived helps you invest in this market without having to manage touchy tenants or midnight maintenance calls, all while potentially earning a passive income stream.
To get started, simply browse through Arrived’s selection of vetted properties, each hand-picked for their appreciation potential and income generation. Once you choose a property, you can start investing with as little as $100, potentially earning quarterly dividends.
Will the taxes really work?
Economists are divided. Manish Bhatt, a senior policy analyst at the Tax Foundation, says the approach may be politically popular but is risky long-term as these kinds of taxes rarely make for sound or broad-based tax policy. Bhatt says that concerns around taxes, “could cause people to make a decision to buy in another nearby state.”
There’s also evidence that higher taxes reduce home sales, and by extension, local revenue.
When Los Angeles passed a “mansion tax” in 2022 on home sales over $5 million, officials expected to raise up to $1.1 billion a year. But as of September 2025, the tax has only generated $830 million, according to the Los Angeles Housing Department [5].
However, Los Angeles recently announced that $316.6 million from this fund will be used to help build affordable housing by waiving some developer costs, based on a separate LAHD report from Sept. 5 [6]. Los Angeles needs to build 456,000 new units before the end of 2029 to comply with state law.
If you own a second home, or are thinking about buying one — especially in high-end vacation markets — it’s worth considering:
- New local or state tax surcharges on non-primary residences
- Higher real estate transfer or conveyance taxes
- Changing property tax brackets tied to occupancy or assessed value
- Future proposals that may emerge in nearby states under budget pressure
Suffice to say, Swift isn’t the only high-net-worth individual who could be impacted by these changes to tax law — whether in Rhode Island or beyond.
If you’re an HNWI and want to get ahead on managing your real estate, you could collaborate with the wealth management experts at Range — who work exclusively with households making at least $300,000 a year or individuals making $250,000.
Through a strategic partnership with Engineered Tax Services, Range members receive free cost segmentation analysis and discounted cost segmentation studies. Range advisors will then use the study as part of a member’s tax planning and strategy.
Cost segmentation shortens depreciation timelines — from the standard 27.5–39 years down to just 5–15 years — allowing you to claim significantly larger tax deductions sooner and keep more money in your pocket. Note that only investment properties qualify for segmentation studies.
However, Range offers a wide variety of financial services tailored to those with a high net worth — not just real estate. And the best part? Range offers users flat-fee pricing and 0% AUM on advisorial services. Book a complimentary demo today to see if Range is right for you, and your money.
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[1]. The National Law Review. “New Rhode Island Tax on Non-Owner-Occupied Properties Assessed at $1 Million or More”
[2]. Zillow. “Zillow, Zestimate for 16 Bluff Ave, Westerly, RI 02891”
[3]. Newsweek. “Rhode Island Considers ‘Taylor Swift Tax’”
[4]. CNBC. “Rhode Island’s ‘Taylor Swift Tax’ on vacation homes of the wealthy is spreading to other states”
[5]. Los Angeles Housing Department. “ULA Revenue”
[6]. Los Angeles Housing Department. “Homes for LA: 2025 Affordable Housing NOFA Program Regulations and Term Sheets — Notice of Funding Availability”
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