Understanding Peconic Bay’s Transfer Tax: A Quick Guide
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Joseph Gordon EditorJoseph Gordon is an Editor with HomeLight. He has several years of experience reporting on the commercial real estate and insurance industries.
When selling a home in the Peconic Bay region, it’s important to consider real estate transfer taxes. These fees are levied by local or state authorities whenever property ownership changes. The rates can differ significantly based on the area, potentially affecting the overall cost of your transaction.
This guide will explain how transfer taxes work for towns in Peconic Bay and what sellers should expect to pay. We will also cover possible transfer tax exemptions that you could qualify for.
Connect with a Top Agent to Help Maximize Value
Even rockstar agents can’t make your tax liability disappear, but HomeLight data shows that the top 5% of agents across the U.S. help clients sell their home for as much as 10% more than the average real estate agent, helping offset the tax bill.
What are transfer taxes?
Real estate transfer taxes are fees charged by state or local governments when property ownership is transferred from one individual to another. According to the Federal Trade Commission, these taxes are due when the title of a property — essentially the document confirming legal ownership — is officially transferred to a new owner. This can occur through sales, inheritance, or gifting of property.
The amount owed in transfer taxes can vary widely based on the property’s location, as different states, counties, and cities establish their own rates and regulations. Transfer taxes primarily serve as a revenue source for local and state governments, funding various public services and infrastructure projects.
Who pays for transfer taxes?
If you sell or purchase a property in Peconic Bay, you might be wondering who is responsible for transfer taxes. Generally, in New York, the seller is responsible for these taxes. In Peconic Bay, it’s the same — the seller pays any required transfer taxes. However, in New York State, there are some exceptions. If the seller does not pay the transfer tax or is somehow exempt, the responsibility falls to the buyer.
What are the types of transfer taxes?
Transfer taxes can differ based on local regulations but are generally categorized into three types: state, city, and county. Here’s a brief overview of how it works in Peconic Bay.
State transfer taxes
In the state of New York, a transfer tax of $2.00 is charged for every $500.00 of the property’s value. Additional taxes may apply depending on your specific location within the state.
New York also has a “mansion tax,” a transfer tax of 1% of the property’s value applied to transactions over $1 million.
City transfer taxes
All towns in Peconic Bay, with the exception of Riverhead, impose a transfer tax rate of 2.5%. This was increased from 2% in 2023 to create a community housing fund. These towns include Southhampton, Southold, East Hampton, and Shelter Island.
Other transfer fees
Beyond transfer taxes, you may be the one hook for additional fees, such as those from a homeowner’s association or local neighborhood organizations. Since these can vary widely by location, consulting a professional is recommended.
If you’re selling your home without a realtor, seeking professional advice can clarify the process and help you understand what to expect regarding the pros and cons of selling a house without a realtor.
Are transfer taxes deductible?
Unfortunately, transfer taxes are not directly deductible from your income taxes. However, there is a strategy that can help lessen the financial burden, particularly concerning capital gains. Capital gains refer to the profit made from selling your property, which is taxable under federal law.
According to the IRS, sellers can classify transfer taxes as selling costs. This allows them to deduct these costs from the total sale price at closing. By lowering the reported sale price, you effectively reduce the capital gains realized, which can decrease the capital gains tax owed on the profit from the sale. This approach can provide a significant financial benefit during tax season.
Transfer tax exemptions
Certain sellers may qualify for transfer tax exemptions based on the transaction type and local regulations. Here are some scenarios where Peconic Bay sellers might be exempt from transfer taxes:
- A transaction involving the United Nations or any international organization of which the United States is a member.
- Transfers to or from a non-profit organization established for religious, charitable, or educational purposes or for preventing cruelty to children or animals.
- Transfers to any government entity exempt from tax payment.
- Transfers made solely as security for a debt or a deed/instrument given solely to return such security.
- Transfers from an agent, dummy, straw man, or conduit to their principal, or vice versa.
- Transfers made by an executor as specified in a will, although a deed given by an executor in connection with a sale of real property interest is taxable.
- Transfers that merely change the identity or form of ownership or organization, provided the beneficial ownership remains unchanged.
Estimating transfer taxes for your home sale
To accurately estimate the potential proceeds from selling your Peconic Bay home, consider using HomeLight’s Net Proceeds Calculator. This tool accounts for essential costs such as closing expenses, transfer taxes, agent fees, and any improvements made to the property, giving you a clear estimate of your potential earnings from the sale.
Additionally, collaborating with a top real estate agent can provide valuable insights tailored to your situation. Depending on market conditions, transfer taxes and other closing costs may sometimes be negotiable.
Editor’s note: This post is for educational purposes only and does not constitute legal or financial advice. Links and mentions of Peconic Bay area tax services or attorneys should not be considered endorsements.
Header Image Source: (Sebastian Staines / Unsplash)
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