Sticker shock at closing can turn a great Hamptons deal into a stressful sprint. If you are buying or selling in Southampton, a clear plan for New York’s mansion tax, the state transfer tax, and the local Peconic Bay Region surcharge will keep you ahead of surprises. You want to know who pays what, how much to budget, and how to confirm the exact numbers before you sign. This guide breaks it down in plain English so you can move with confidence. Let’s dive in.

Quick snapshot: the three big taxes

• Mansion tax: a one-time 1% New York State tax on residential purchases of $1,000,000 or more. The buyer typically pays this.
• State transfer tax: New York’s statutory real estate transfer tax, commonly 0.4% of the sale price. The seller generally pays, unless the contract says otherwise.
• Peconic Bay Region surcharge: a local transfer tax that funds community preservation in East End towns such as Southampton. Rates and rules are set locally and can materially affect closing costs. Who pays depends on local custom and your contract.

Mansion tax: what it is and when it applies

The mansion tax is a one-time state tax that applies when a residential property transfers for $1,000,000 or more. It covers one to three family homes and co-op or condo units used as residences. The state imposes the tax on the purchaser, so you should expect to pay it at closing if you are buying at this price point.

The tax is typically collected by your closing attorney or title company when documents are prepared for recording. While there are statutory exemptions for specific scenarios, they are narrow and require documentation. Ask your attorney or title company early if you think an exemption might apply to your transaction.

New York State transfer tax: the seller’s standard

New York also levies a separate real estate transfer tax. The commonly cited base rate is 0.4% of the total consideration. By law, the tax is generally imposed on the seller. That said, parties can negotiate who ultimately covers it in the contract. Your title company and attorneys prepare and file the required state transfer tax forms at closing.

Peconic Bay Region surcharge in Southampton

If you are closing in Southampton, you are in the Peconic Bay Region. Local law authorizes an additional transfer surcharge to fund community preservation and open space. This surcharge is separate from the state taxes above and is collected at closing.

Key points for your planning:

• The surcharge applies only within the designated Peconic Bay Region towns and areas.
• Rates, thresholds, and exemptions are set locally and can change, so you need the current Southampton guidance for your address and property type.
• Local practice often places this surcharge on the seller, but contracts can allocate costs differently.

Because this local surcharge can be significant, it is important to price it into your net sheet as early as possible.

Who pays what, and what you can negotiate

• Mansion tax: Imposed on the buyer under state law. Even if the parties allocate costs differently in the contract, the buyer remains the statutory taxpayer for filing purposes.
• State transfer tax: Generally imposed on the seller, but buyers and sellers often negotiate this in the contract.
• Peconic Bay Region surcharge: Often paid by the seller in local practice, yet this is negotiable and may vary with market conditions.

Always confirm the exact allocation in your fully executed contract. Your attorney and title company will reflect the agreed allocation on your closing statement and file the proper returns.

How much could you owe? Two simple examples

These examples are for illustration only. The Peconic Bay Region surcharge percentage varies by local law, so confirm current rates for your specific property and town.

Example A: $1,000,000 Southampton sale

• Mansion tax (buyer): 1% of $1,000,000 = $10,000
• NY State transfer tax (seller): 0.4% of $1,000,000 = $4,000
• Peconic/CPF surcharge (seller, illustrative): if 2% then $20,000
• Total transfer taxes in this example: $34,000 plus recording and miscellaneous fees

Example B: $2,500,000 Southampton sale

• Mansion tax (buyer): 1% of $2,500,000 = $25,000
• NY State transfer tax (seller): 0.4% of $2,500,000 = $10,000
• Peconic/CPF surcharge (seller, illustrative): if 2% then $50,000
• Total transfer taxes in this example: $85,000, plus recording and miscellaneous fees

These numbers show why you want an early itemization from your professionals. On mid and high price points, the combined taxes can reach multiple percentage points of the sale price.

How these taxes are collected at closing

Transfer taxes are typically paid at or before recording of the deed. Your closing attorney and title company will prepare the necessary state and local returns, collect the funds, and remit payment to the appropriate authorities. If taxes are not correctly calculated and paid, recording can be delayed and penalties may apply.

If you are financing, your lender will require clear title and confirmation that taxes have been handled before they fund the loan. Keep your lender, attorney, and title company aligned on the tax numbers well before the closing date.

How to confirm your exact cost

You can lock in accurate numbers long before closing. Use this checklist:

1. Ask your attorney or title company for a written itemization of state and local transfer taxes based on your deal terms and the property address.
2. Confirm who is paying each tax in the purchase contract and make sure the allocation is reflected in your closing statement.
3. Review current guidance from New York State for the mansion tax and state transfer tax, and from the Town of Southampton or Suffolk County for the local Peconic Bay Region surcharge.
4. If you are a buyer at or near $1,000,000, budget the mansion tax at 1% unless your attorney confirms a qualifying exemption.
5. Re-run the numbers any time the price or terms change, such as a credit or adjustment.

Buyer planning tips

• Budget early: If your target price is $1,000,000 or more, build the mansion tax into your cash-to-close estimate from day one.
• Stress test your budget: Add a range for the local Peconic surcharge so you have room for the final number once confirmed.
• Coordinate with your lender: Make sure your loan officer knows the expected taxes and fees so your cash-to-close is accurate.
• Ask about exemptions: If your situation might fit a statutory exemption, ask your attorney what evidence is required and when to provide it.

Seller planning tips

• Net sheet clarity: Include the New York State transfer tax and the local Peconic surcharge in your preliminary net sheet so you can weigh offers with full information.
• Contract language: If you are negotiating who pays which taxes, be explicit in the contract. Your attorney should spell out responsibility for each tax.
• Timing and credits: Confirm how any credits, concessions, or price adjustments will affect transfer tax calculations.
• Document readiness: Work with your attorney and title company to ensure the correct transfer tax forms are prepared to avoid recording delays.

What can change, and how to stay current

Tax law can evolve. In recent years, there have been proposals to modify the mansion tax structure above $1,000,000. Local transfer surcharges that fund community preservation can also be updated by local authorities. Before you rely on a number, ask your closing attorney or title company to confirm current state and local rules for your specific property and timing.

Common pitfalls to avoid

• Assuming the seller always pays all transfer taxes: Parties can negotiate some costs, and statutory liability may still apply.
• Forgetting the mansion tax at $1,000,000: Buyers should plan for the 1% if the price meets or exceeds the threshold.
• Relying on outdated percentages: Local Peconic/CPF rates can change. Confirm before you sign.
• Leaving it to the closing table: Get itemized numbers early, update them with every change, and keep your lender in the loop.

The bottom line

If you are buying or selling in Southampton, transfer taxes are part of the terrain. The mansion tax, the state transfer tax, and the local Peconic Bay Region surcharge can add up, yet none of them should be a surprise. With early planning, clear contract language, and a precise itemization from your attorney and title team, you can protect your cash flow and your timeline.

If you want a discreet, high-touch approach to navigating a Southampton transaction, connect with Matthew Breitenbach for advisory-driven guidance. Request Private Access.

FAQs

What is the New York mansion tax for Southampton buyers?

• It is a one-time 1% state tax on residential purchases of $1,000,000 or more, typically paid by the buyer at closing.

Who usually pays the Peconic Bay Region surcharge in Southampton?

• Local practice often places it on the seller, but payment can be negotiated and should be confirmed in the contract and closing statement.

Does the mansion tax apply to condos and co-ops in the Hamptons?

• Yes, it generally applies to qualifying residential transfers of condos and co-ops when the price meets the $1,000,000 threshold.

Can buyer and seller negotiate transfer taxes in Southampton?

• Yes, many costs can be allocated by contract, although statutory liability for specific taxes still applies to the designated party for filing purposes.

When are transfer taxes paid in a Southampton closing?

• They are typically collected and remitted at or before recording, with your attorney and title company preparing the required returns.