June 25, 2014
Saving Money on Transactions in the Hamptons
Considering buying a house in the Hamptons, North Fork or Shelter Island this summer? While the large transfer tax in these towns catches many buyers of homes and land by surprise every year, some are able to take advantage of certain exemptions to avoid the tax altogether. When buying, it’s important to fully understand the unique rules of the towns’ transfer taxes.
In 1998, the towns of East Hampton, Riverhead, Shelter Island, Southampton, and Southold lobbied the New York State legislature to create a special 2% transfer tax. The Peconic Bay Region Transfer Tax is a one‐time tax that the buyer of real estate is required to pay when purchasing a new or used home or vacant property. The money goes to the Peconic Bay Region Community Preservation Fund, which is a conservation program dedicated to preserving open space and farmland in the five East End towns.
This tax is in addition to the 1% New York State mansion tax on residential properties priced at $1,000,000 and above, so many buyers will end up paying 3% in transfer taxes.
There is some good news: the first $250,000 (in East Hampton, Southampton, and Shelter Island) or $150,000 (in Riverhead, and Southold) of the purchase price of a house or building is exempt from the real estate transfer tax. (The exemption limits are $100,000/$75,000 for unimproved land.)
In addition, first time homebuyers who will use a home as their primary residence are exempt from the transfer tax, if the purchase price and income of the first time homebuyers fall within certain limits. Each town has a separate application process for this exemption.