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Hamptons Home Sales: Who Pays Which Taxes?

John A. Viteritti

Constructed in 2009, this 4500 sq ft home for $2,950,000 rests on 2 lush, parklike acres just outside the Village of East Hampton. Listed by Charlie Esposito and Debbie Brenneman of The Corcoran Group. (Courtesy Photo)

Among the taxes that affect the transfer of real property in the Hamptons and North Fork are the New York State Seller Transfer Tax, the New York State "Mansion Tax," and the Community Preservation Fund Transfer Tax, commonly known as the "Peconic Tax." But, who pays what?

The first is a tax of $2.00 for every $500 or any fraction thereof of the sale price. It is paid by the seller. If the buyer assumes the sellers existing mortgage, the amount assumed is subtracted from the sale price and the seller pays the tax on the difference.

The second is a tax on the purchase of real property improved by a one, two, or three-family dwelling including condominiums and cooperatives, if the purchase price is $1 million or more. The tax is 1% of the full purchase price normally paid by the buyer. However, either party may pay all or part of the tax. If the tax is not paid at closing, a lien will be filed against the property affecting the transfer of title. Pending before the New York State Legislature is an amendment to the tax law which would increase the $1 million dollar trigger to $1,750,000. However, it would apply only in cities with populations of one million or more, effectively, only the five boroughs of New York City - Manhattan, Bronx, Brooklyn, Staten Island, and Queens.

The third is a tax in effect in the five towns of Eastern Long Island, known as the Peconic Bay Region - Southampton, Easthampton, Shelter Island, Southold, and Riverhead. It applies, (with certain exceptions), to all transfers of real property. In Southold and Riverhead, the tax is 2% on the amount over $75,000 on the purchase price of unimproved land, and 2% on the amount over $150,000 on the purchase price of improved land.

In Southampton, East Hampton, and Shelter Island, the tax is 2% on the amount over $100,000 on the purchase price of unimproved land, and 2% on the amount over $250,000 on the purchase price of improved land. Like the "Mansion Tax" it is normally paid by the buyer but either party may pay all or part of the tax. If it is not paid at closing, a lien will be placed against the property affecting the transfer of title. These three towns, Southampton, Easthampton, and Shelter Island provide exemptions from the tax for first time homebuyers who meet certain qualifications, including those related to income and purchase price of the home. Southold and Riverhead do not.

Real estate agents should disclose these taxes to sellers and buyers at the earliest opportunity. Those who think they might qualify for the first-time homebuyer exemption should consult their attorney, as all sellers and buyers should with respect to any of these taxes.

The New York State Basic STAR Program provides a reduction of the school portion of property taxes on primary residences to owners whose adjusted gross incomes do not exceed $500,000. Those 65 years of age and older, whose adjusted gross income does not exceed $79,050, may be eligible for the Enhanced STAR reduction. The New York State Department of Taxation and Finance has jurisdiction over the "Mansion Tax," the STAR Program, and the Seller Transfer Tax. Information regarding the "Peconic Tax" may be acquired from each of the five Eastern Long Island towns included in the Peconic Region.

John is a St. John's University graduate, licensed Real Estate broker, DOS Certified Instructor, lecturer, teaches real estate license classes at Cook Maran Real Estate School, and is a well-respected consultant to the real estate industry. He previously taught at LIU and NYU. www.johnaviteritti.com

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