Rhode Island's new tax on second homes, dubbed the 'Taylor Swift Tax,' takes effect this week targeting wealthy out-of-towners who own coastal vacation properties. The levy imposes $5 for every $1,000 that a home's assessed value exceeds $1 million, aiming to fund affordable housing initiatives.

The measure specifically affects owners of luxury coastal properties in areas like Newport and Little Compton, where high-value second homes are common. While the tax gained its nickname from pop star Taylor Swift's nearby Watch Hill mansion, it applies broadly to all vacation homes above the threshold.

Lawmakers approved this annual tax last year as part of an effort to address housing affordability challenges. The revenue generated will support local affordable housing construction projects throughout the state.

The tax represents Rhode Island's latest attempt to balance revenue generation with housing policy goals, potentially influencing how coastal communities approach second-home ownership taxation.