The Peconic Bay tax is a 2.5% real estate transfer tax charged on property purchases in the five easternmost towns of Suffolk County, New York: East Hampton, Riverhead, Shelter Island, Southampton, and Southold.1Suffolk County Government. Suffolk County Clerk Recording Forms It funds open-space preservation and affordable housing in the Peconic Bay Region and applies on top of the standard New York State and Suffolk County transfer taxes. The rate combines a 2% Community Preservation Fund tax authorized by Article 31-D of the New York Tax Law with a 0.5% Community Housing Fund surcharge each town has separately adopted.2New York State Senate. New York Tax Law 1449-BB – Imposition of Tax No other municipality in New York charges it.
How Much You Actually Pay
The 2.5% rate does not apply to the entire purchase price. Each town exempts the bottom slice of the sale, and you owe tax only on the portion above that threshold. The threshold depends on the town and on whether the property is improved or vacant.
Improved Residential Property
Southampton, East Hampton, and Shelter Island each exempt the first $400,000 of an improved residential purchase, provided the total price is $2,000,000 or less.3Town of Southampton. Frequently Asked Questions – Community Preservation Fund Buy a $1,200,000 home in any of the three, and the 2.5% hits $800,000, for a tax of $20,000. Once the price crosses $2,000,000, the threshold falls away entirely and the full sale is taxed.
Southold uses a lower threshold of $200,000 for improved property.4Town of Southold. Frequently Asked Questions – Land Preservation A $700,000 home in Southold is taxed on $500,000, or $12,500. Riverhead sets its threshold by local law and it has historically run below the Southampton group; confirm the current figure with the town clerk before closing.
Vacant Land
Unimproved parcels get much smaller exemptions. In Southampton the first $100,000 of a vacant residential lot is exempt.3Town of Southampton. Frequently Asked Questions – Community Preservation Fund In Southold the vacant-land threshold is $75,000.4Town of Southold. Frequently Asked Questions – Land Preservation A land purchase in the Peconic Bay towns can generate a much larger tax bill than a comparably priced house.
Who Can Avoid the Tax
New York Tax Law Section 1449-ee lists the full set of exempt conveyances. The categories most relevant to ordinary transactions:
- Transfers to the United States, New York State, their political subdivisions and public corporations, or the United Nations.5New York State Senate. New York Tax Law 1449-EE – Exemptions
- Conveyances without a true change in beneficial ownership, including bona fide gifts with no consideration, corrective or confirmatory deeds, partition deeds, bankruptcy transfers, and deeds that merely change the form of ownership.
- Deeds given only to secure a debt, such as a mortgage.
- Property already subject to a conservation easement, agricultural district commitment, or other restriction against non-agricultural conversion. A buyer of viable agricultural land can also qualify by recording a restriction of at least three years against non-agricultural use at the same time as the deed.
One category the statute does not include: transfers between spouses or pursuant to a divorce decree. If you’re receiving property through a divorce settlement in one of these five towns and consideration exceeds the threshold, budget for the tax.
First-Time Homebuyer Exemption
Southampton, East Hampton, Shelter Island, and Southold offer a first-time homebuyer exemption. Riverhead does not.5New York State Senate. New York Tax Law 1449-EE – Exemptions Every buyer on the deed must be a first-time homebuyer, and the home must be a primary residence. Two financial tests then apply, both keyed to State of New York Mortgage Agency (SONYMA) limits for Suffolk County non-target areas:
- Purchase price cap: 150% of the SONYMA one-family purchase price limit in Southampton, East Hampton, and Shelter Island; 60% of that limit in Southold.
- Income cap: the SONYMA income limit for one- and two-person households in Suffolk County.
As of August 2025, the SONYMA one-family purchase price limit for Suffolk County non-target areas is $1,255,920, and the one- and two-person income limit is $197,880.6New York State HCR. Low Interest Rate Program Income and Purchase Price Limits That works out to a purchase price ceiling of roughly $1,883,880 in Southampton, East Hampton, and Shelter Island, and about $753,552 in Southold. SONYMA updates these figures periodically, so verify the current numbers with the town’s CPF office before relying on them at closing.
Paying the Tax
The tax is collected at the Suffolk County Clerk’s Office when the deed is recorded, and the clerk will not record the deed until the return is filed and the full amount paid.3Town of Southampton. Frequently Asked Questions – Community Preservation Fund The title company or closing attorney typically handles this as part of the closing package.
The return asks for the property’s tax map designation (Section, Block, and Lot), the names and addresses of buyer and seller, the total consideration, and, if applicable, the exemption code.7Suffolk County Government. Peconic Bay Region Community Preservation Fund Tax Form Payment is by certified check or attorney’s check for the exact amount due, kept separate from recording fees and state transfer taxes. The form is available through the Suffolk County Clerk’s recording forms page or at the relevant town hall.1Suffolk County Government. Suffolk County Clerk Recording Forms
What Happens If the Tax Goes Unpaid
Because the clerk refuses to record without payment, most buyers never trigger a penalty. When a taxable conveyance does go unpaid, a 10% penalty applies to the unpaid tax immediately, plus 2% per month the tax remains overdue. The monthly interest charge caps at 25%, but daily compounded interest continues to accrue on the unpaid balance on top of that flat penalty.7Suffolk County Government. Peconic Bay Region Community Preservation Fund Tax Form On a $15,000 tax bill, a few months of delay can add thousands.