This bill makes several changes to the Rhode Island personal income tax rates and deductions. It imposes a Rhode Island personal income tax on residents and nonresidents at a rate of 25.5% for tax year 2001 and 25% for tax year 2002 and thereafter. It also allows taxpayers to elect to use an alternative flat tax rate to calculate their personal income tax liability. The bill also provides for alternative minimum tax calculations and adjustments for inflation. The bill also makes changes to the maximum capital gains rates and itemized deductions. It imposes an additional tax on net capital gains for tax years beginning on or after January 1, 2024. The bill also specifies the standard deduction amounts for different filing statuses and allows for an additional standard deduction for individuals age 65 or older or blind. There is also a limitation on the basic standard deduction for certain dependents.

This bill also establishes an overall limitation on itemized deductions for individuals whose adjusted gross income exceeds a certain threshold. The amount of itemized deductions allowable for the taxable year is reduced by the lesser of 3% of the excess of adjusted gross income over the threshold amount or 80% of the amount of itemized deductions otherwise allowable. The threshold amount varies depending on filing status. The bill also imposes an alternative minimum tax, which is an additional tax equal to the excess of the tentative minimum tax over the regular tax. The tentative minimum tax is calculated based on a percentage of the taxable excess, which is the federal alternative minimum taxable income modified by certain adjustments. The bill also establishes a tax for children under 18 with investment income and allows for the averaging of farm income for individuals engaged in farming or fishing businesses. Finally, the bill includes provisions for cost-of-living adjustments to various dollar amounts in the tax code.