The two taxes, and who pays them
New York Tax Law authorizes the five East End towns to impose a real estate transfer tax of two percent of the consideration, funding the Peconic Bay Community Preservation Fund. Four of them impose a further half of one percent for a community housing fund, which applies to conveyances made on or after 1 April 2023, with an exception for conveyances under a binding written contract signed before that date.
The statute is explicit about who pays: the real estate transfer tax is paid by the grantee. Where the grantee fails to pay, or is exempt, the grantor has the duty to pay it, and where the grantor pays for that reason the tax becomes the joint and several liability of both.
That makes the East End the mirror image of the rest of New York, where the base transfer tax falls on the seller. A buyer in Southampton pays the state's mansion tax, where it applies, and two and a half percent to the town on top of it.
The allowance, which differs by town
The statute exempts part of the consideration from the tax. The amount depends on the town and on whether the parcel is improved.
In East Hampton, Shelter Island and Southampton the allowance is $400,000 on an improved parcel and $100,000 on an unimproved one. In Riverhead and Southold it is $200,000 on an improved parcel and $75,000 on an unimproved one.
Every one of those allowances carries the same limit: it applies only to conveyances of residential property where the consideration is two million dollars or less. Above two million the allowance disappears and the tax reaches the whole price.
That threshold produces a result worth understanding before a price is agreed. A Southampton house at two million pays on $1.6 million after the allowance. The same house at two million and one dollar pays on the whole two million and one, because the allowance is gone. The difference between those two closings is ten thousand dollars of tax on one dollar of price.
The exemption first-time buyers have to ask for
A first-time home buyer purchasing a primary residence is exempt from the tax entirely in Southampton, East Hampton, Shelter Island and Southold. Riverhead does not offer it.
Two conditions attach. The purchase price falls within 150 percent of the New York State mortgage agency's purchase price limits for Suffolk County under its low-interest program, in the non-target one-family category, as those limits stand on the date of the contract — and in Southold, within 60 percent of them rather than 150. The buyer's household income falls within the same agency's limits for the non-target one- and two-person household category for Suffolk County on that date.
The third condition is the one that costs people money. The exemption is granted only on application. The owner applies on a form the town prescribes and files it with the town. No part of the closing process produces it automatically, and a buyer who qualifies and does not apply pays the tax in full.
On an eligible purchase that is a five-figure sum, surrendered by not asking.
Filing
A conveyance in any of the five towns is recorded with the Peconic Bay form, which the Suffolk County Clerk requires alongside the deed. Both parties sign it, and it carries Social Security or Federal identification numbers for all parties. Where no deed is recorded, the form and the payment go to the town.
The ordinary Suffolk County recording requirements apply as well — legal size paper for the endorsement form and the RP-5217, black ink, and the county's limits on which checks it will accept for transfer and mortgage tax.