Vacation and second homes could potentially face a new tax dubbed the 'Taylor Swift Tax', leaving homeowners wondering if their properties might be next.

In a bid to address the growing issue of affordable housing and tax fairness, Rhode Island has introduced a new property tax surcharge on luxury second homes. Known colloquially as the "Taylor Swift Tax," the new measure is set to impact the Ocean State and potentially inspire other states to follow suit.

Starting from mid-2026, property owners in Rhode Island with second homes valued at $1 million or more that are not used as a primary residence or rented out for at least 183 days per year will face a surcharge. The tax is designed to encourage owners to use their properties more frequently or make them available for rent, reducing the number of empty houses.

The surcharge applies to every $500 of assessed value above $1 million at a rate of $2.50 per $500. For a second-home owner with a property valued at $3 million, this could mean an additional annual surcharge of approximately $10,000, in addition to regular property taxes.

Notably, the tax has gained attention due to its association with Taylor Swift's beachfront estate in Watch Hill. The surcharge on Swift's property is expected to add approximately $136,000 annually, reportedly nearly doubling the current property tax bill for that property.

Critics argue that the tax unfairly penalises second-home owners who contribute significantly to local economies. However, supporters of the tax believe it could generate revenue for affordable housing investments, potentially helping to alleviate the housing market's affordability issues.

The tax base will adjust annually for inflation starting in 2027. As of September 2025, no specific states are publicly stating plans for a similar tax on vacation homes over $1 million, and there are no concrete developments or announcements suggesting such initiatives elsewhere in the United States or Europe.

Key tax changes in different states should be monitored, and consulting a trusted tax professional is advised to understand potential impacts on one's bottom line.

Meanwhile, other areas are considering similar measures. Cape Cod is considering a 2% transfer fee on luxury home sales over $2 million to fund affordable housing, while Montana implemented a graduated property tax system in 2025 that increases rates on luxury homes and non-primary residences.

Los Angeles' Measure ULA, a "mansion tax," imposes a 4% transfer tax on property sales between $5.3 million and $10.6 million, and a 5.5% tax on sales above $10.6 million, starting from April 2023.

The growing trend towards property taxes on luxury second homes highlights a shift in focus towards tax fairness and affordability in the housing market. As more states consider similar measures, the impact on the housing market and local economies will be a topic of ongoing discussion and observation.