Buying in the Hamptons: taxes, permits and flood zones

Which town are you buying in?

"The Hamptons" lie in two towns, Southampton and East Hampton, which contain incorporated villages such as Southampton Village, Sag Harbor, East Hampton Village, Westhampton Beach and Quogue. Shelter Island, Southold and Riverhead are the other East End towns in the same tax region, though they are not usually called the Hamptons (Tax Law §1449-aa).

The town decides the Peconic Bay tax rate and exemption. Rental rules are set by towns and villages, and a village can have its own code, so for a house inside a village check with the village as well as the town.

The Peconic Bay tax, town by town

Each of the five towns charges a 2% tax on property transfers for its Community Preservation Fund, and state law lets a town add 0.5% for a community housing fund after a referendum (Tax Law §1449-bb). East Hampton, Southampton, Shelter Island and Southold added it, for contracts signed after 1 April 2023, making 2.5%; Riverhead did not (NY Assembly). The buyer pays the tax (Tax Law §1449-dd), at closing (Town of Southampton).

Part of the price is exempt, but only when the price of residential property is $2 million or less. Above that, the whole price is taxed (Tax Law §1449-ee).

"House" here means improved residential property; "vacant land" means unimproved residential land. The exemptions apply only up to a $2 million price.

The $2 million line is a cliff. In Southampton, a house at exactly $2 million pays $40,000; at $2,000,001 it pays $50,000.

The first-time buyer exemption

In Southampton, East Hampton, Shelter Island and Southold (not Riverhead), a home bought as a primary residence by first-time buyers can be fully exempt from the Peconic Bay tax. Every buyer on the deed must be a first-time buyer, and both the price and the household's income must be within limits tied to the State of New York Mortgage Agency's (SONYMA's) figures for Suffolk County in force on the contract date. The price limit is 150% of SONYMA's purchase price limit in Southampton, East Hampton and Shelter Island, and 60% of it in Southold (Tax Law §1449-ee(4)).

The exemption isn't automatic. You apply to the town on its form, and the town must approve it before closing (§1449-ee(5)); in Southampton the application comes from the Community Preservation Office (Town of Southampton). We don't list the dollar limits here because they follow SONYMA's current figures; ask the town office for the ones that apply to your contract date.

Mansion tax, transfer tax and Suffolk mortgage tax

Mansion tax. Outside New York City it is a flat 1% of the whole price at $1 million or more, paid by the buyer. The city's higher brackets don't apply on Long Island (NYS Department of Taxation and Finance).

New York State transfer tax. 0.4% of the price ($2 per $500), paid by the seller. The return (Form TP-584) is filed with the Suffolk County Clerk, and the tax is due within 15 days of the deed's delivery (NYS DTF).

Mortgage recording tax. In Suffolk County it is 1.05% of the loan (NYS DTF memo TSB-M-05(4)R). On a typical home loan from a bank the lender must pay 0.25% of that (Tax Law §253), so the borrower pays 0.8%. On a one- or two-family house the first $10,000 of the loan is exempt from the 0.30% additional tax, a saving of $30 (NYS DTF), which our calculator leaves out. Pay cash and there is no mortgage tax.

Flood zones and flood insurance

Before you make an offer, look the address up on FEMA's Flood Map Service Center, which searches the official flood maps by address (FEMA). If the house is in a high-risk zone (a Special Flood Hazard Area), flood insurance is required as a condition of federal financial help tied to the property, and FEMA counts loans as such help (FEMA). Ask your lender early whether it will require a policy.

New flood policies usually take effect only after a 30-day wait, but a policy bought in connection with a mortgage takes effect at closing (NFIP Flood Insurance Manual). Get a quote early: the premium is part of what the house costs to own.

The seller's Property Condition Disclosure Statement, which must reach you before you sign the contract for a house, asks whether the property is in a FEMA floodplain, whether it has flood insurance, whether it has had federal flood aid and whether flood claims have been made (Real Property Law §462). Read those answers with the map.

If you plan to rent it out

Town of Southampton. Any rental needs a town rental permit, valid for two years. Permits don't transfer: a new owner must apply in their own name, as must an owner who moves the house into an LLC, trust or estate. The minimum stay is 14 days; anything shorter is a transient rental and not allowed. Advertising or showing a house for rent without a permit can bring violations and a two-year bar on renting (Town of Southampton rental FAQ). An owner who lives in the house may take up to two boarders without a permit.

The standard fee is $400 for two years (schedule effective 1 January 2025), or $800 if the property is in violation of the town's rental chapter. The application needs floor plans, a survey and certificates of occupancy or compliance for every structure, and a safety inspection by a town officer or a licensed architect or engineer (Town of Southampton permit application). The town estimates one to three weeks from a complete application, and two to four in summer (Southampton rental FAQ). If you are counting on rental income in your first summer, apply as soon as you close.

East Hampton and the villages. East Hampton Town has its own rental rules, and villages have their own codes. Ask the town's Building Department, and the village if the house is in one, before you advertise.

Every lease. New York requires each residential lease to say whether the property is in a FEMA flood zone, to disclose flood damage the landlord knows of, and to tell the tenant that flood insurance for renters is available (Real Property Law §231-b).

A worked example in Southampton

Our closing-cost calculator applies the Southampton, East Hampton and Shelter Island rules for the Peconic Bay tax: 2.5%, with $400,000 exempt up to a $2 million price. In Southold the exemption is $200,000, and in Riverhead the rate is 2%, so adjust for those towns.

A $1,800,000 house with 25% down ($1,350,000 loan): mansion tax $18,000, mortgage recording tax $10,800, Peconic Bay tax $35,000 (2.5% of the price above $400,000). With the calculator's estimates for lender, title, attorney, escrow and insurance, which are assumptions rather than quotes, the buyer's closing costs are $98,445 and the cash at closing, with the down payment, is $548,445. The seller pays $7,200 in state transfer tax. Open this example.

A $3,500,000 house with 30% down ($2,450,000 loan): mansion tax $35,000, mortgage recording tax $19,600, and Peconic Bay tax $87,500, on the full price because it is above $2 million. Buyer's closing costs $191,795; cash at closing $1,241,795. Open this example.

Neither figure includes flood insurance, which depends on the house and its zone, or a rental permit.