The Peconic Bay Tax: What It Really Costs an East End Investor
If you are buying or selling rental property in the five East End towns, this tax changes your closing numbers more than most people expect.
Anyone buying real estate in East Hampton, Shelter Island, Southampton, Southold or Riverhead pays into the Peconic Bay Region Community Preservation Fund, often called the Peconic Bay tax. It is a transfer tax collected at closing and the buyer is the one who owes it, not the seller.
How much it actually is
In Riverhead, the rate stays at 2 percent of the taxable consideration. In East Hampton, Shelter Island, Southampton and Southold, the rate is now 2.5 percent, after a half point was added for transfers going into contract after April 1, 2023, with that extra 0.5 percent funding a separate community housing fund rather than land preservation.
The tax does not apply to the full purchase price. Southampton exempts the first $400,000 of an improved parcel and the first $100,000 of vacant land, as long as the sale price is $2,000,000 or less. Southold's allowance is lower, with $200,000 exempt on improved property. So on a $1,000,000 improved property purchase in Southampton, you would pay 2.5 percent on $600,000, not on the full million.
This is a one time tax paid at closing, collected by the title closer and filed with the deed at the Suffolk County Clerk's Office. It shows up as a line item you cannot skip, so it belongs in your underwriting before you make an offer, not after.
Why investors do not get the exemption
The towns offer a first time homebuyer exemption from this tax, but it is built for owner occupants. The rules require the property to become the buyer's primary residence, and in Shelter Island the application specifically states the buyer must certify they do not own a vacation or investment home as of the closing date. If you are buying a rental, a second home, or anything that will not be your primary address, this carve out is not available to you. Build the full tax into your numbers.
The exemption itself is also uneven across towns. East Hampton, Shelter Island and Southampton have offered it for years, and Southold added the same opportunity more recently, while Riverhead still does not offer it. None of that changes an investor's exposure, since the exemption was never written for non owner occupied purchases in the first place.
What this means for your return
The fund itself is active money, not a quiet line item. The Community Preservation Fund took in $152.77 million across the five towns in 2025, up from $131.5 million in 2024, and the companion housing fund has raised $79.12 million since it began in 2023. That volume tells you the tax is consistently enforced and collected, so there is no quiet way around it on a legitimate deal.
When you are modeling acquisition costs on an East End rental, run the Peconic Bay tax alongside your mortgage recording tax, title costs and attorney fees before you commit to a price. A $1,000,000 purchase in Southampton with the $400,000 exemption applied means 2.5 percent on $600,000, or $15,000, due at closing in addition to everything else. On a lower priced Riverhead property, the math is 2 percent with no exemption cushion built in for investors.
If you want to see how a purchase price, this tax and your other closing costs land on paper, run the numbers through a net sheet before you sign anything. And if you are weighing whether to hold, refinance or sell a Peconic Bay area rental this year, drop a question at /askmuds.