Picture a buyer under contract this fall on a house in Southampton priced at $2.35 million, right at the Hamptons' current median. Somewhere between signing the contract and sitting down at the closing table, their attorney delivers a line item that wasn't in the original budget conversation: a transfer tax bill calculated not on the amount above a modest exemption, but on the entire purchase price. The buyer isn't imagining a surprise. They just crossed a threshold written into New York State tax law that quietly erases a benefit smaller Hamptons deals still get to keep.
That threshold, and the reason more buyers are hitting it in 2026 than in years past, tells you more about the Hamptons market right now than the median price itself does.
What the Peconic Bay Tax Actually Costs Now
Four of the five East End towns, Southampton, East Hampton, Shelter Island, and Southold, currently charge a combined 2.5 percent transfer tax on most residential sales. That figure is two separate levies stacked together: the original 2 percent Community Preservation Fund tax that East End voters approved back in 1998 to protect open space, and a newer 0.5 percent Community Housing Fund surcharge that voters added in 2022 and that took effect on sales starting in the spring of 2023. Riverhead is the outlier. Voters there haven't added the housing surcharge, so Riverhead sales still carry only the original 2 percent rate.
Here's the part that catches buyers off guard. Southampton Town's own guidance spells out an exemption for improved residential property: the first $400,000 of the sale price is shielded from the tax, but only when the total consideration is $2 million or less. Cross that line and the exemption doesn't shrink. It disappears entirely, and the tax applies to the full purchase price.
Run the math on two deals in Southampton that are barely $200,000 apart. A $1.9 million sale, just under the threshold, gets the $400,000 exemption, so only $1.5 million is taxed at 2.5 percent, for a bill of $37,500. A $2.1 million sale, just over the line, gets no exemption at all. The full $2.1 million is taxed at 2.5 percent, for a bill of $52,500. A $200,000 difference in price produces a $15,000 difference in tax, an effective rate of 7.5 percent on that narrow slice of the deal, three times the nominal rate, purely because the exemption vanishes the moment the price crosses $2 million rather than phasing out gradually. A title agency that tracks these rules noted the 2023 amendment did two things at once: it raised the exemption amount for smaller deals and eliminated it altogether above a set threshold. Buyers who assume the same percentage applies evenly across every price point are working from an outdated mental model.
New York's statewide mansion tax, a separate 1 percent charge on purchases of $1 million or more, sits on top of this. As fewer Hamptons deals close under either the $1 million mansion tax trigger or the $2 million Peconic exemption ceiling, more buyers are paying both taxes at full strength on the entire price, not a discounted portion of it.
Why This Cliff Is Suddenly Catching More Buyers
The reason more deals are landing above that $2 million line isn't that every Hamptons home appreciated 30 percent this year. It's that the kind of home that used to trade below the line has largely stopped trading at all.
In the fourth quarter of 2025, the Hamptons median sale price hit a record $2.34 million, up 34 percent year over year, according to a report from Douglas Elliman and appraiser Jonathan Miller of Miller Samuel. Miller's own explanation for the jump wasn't broad appreciation. It was a shift in the mix of what's actually selling, a greater share of total sales coming from the biggest, most expensive homes. By the second quarter of 2026, William Raveis's East End report, compiled by Judi Desiderio, showed the median climbing again, up roughly a quarter over the prior year to around $2.35 million, even as the number of homes sold fell close to 10 percent.
The entry point is where this shows up most clearly. On a panel of East End brokers recapping the market earlier this year, one broker put it plainly: the record median makes for good publicity, but it doesn't mean any single seller's home is worth 30 percent more than it was. It reflects the collapse of the entry point, homes priced under $1 million are nearly nonexistent now. Miller's own data backs that up. In the second quarter of 2026, sales under $1 million fell to just 14.6 percent of the market, near a record low, while the $1 million to $5 million range, the actual working middle of the Hamptons market, took a record 67.8 percent share. For context on how far this has moved, Miller has noted that when he started tracking the market in the first quarter of 2005, the median sale price was $735,000.
None of this means the top of the market is immune to gravity. In March 2026, a storied East Hampton oceanfront estate at 43 East Dune Lane closed for $72 million, a 40 percent reduction from its original $120 million ask, according to reporting on the year's priciest Long Island deals. Records at the median and steep discounts at the ceiling can and do coexist. A rising median describes what's changed about the mix of homes closing. It doesn't describe what any one house, including the one you're bidding on, is actually worth.
Where the Mix Shift Shows Up Hamlet by Hamlet
The Hamptons isn't one market, and the mix shift plays out differently depending on where you're looking.
| Hamlet | What Q2 2026 data shows | What it means for a buyer |
|---|---|---|
| Bridgehampton, East Hampton Village, Southampton Village | Consistently the three highest median sale prices on the South Fork | These are the "crown jewel" hamlets, where scarcity and demand both concentrate. Expect the least room to negotiate on well-priced, move-in-ready homes. |
| Amagansett | Sales volume down 45 percent year over year, but the second-highest median at nearly $4.3 million | Fewer deals are closing, but the ones that do skew large. Thin volume here makes single transactions more influential on the headline number. |
| Hampton Bays | The only hamlet with a median sale price still under $1 million | Described by Raveis's Judi Desiderio as a "gateway" drawing a younger buyer priced out elsewhere, though she expects that sub-$1 million window to close before long. |
| Mattituck and Jamesport (North Fork) | Mattituck posted the North Fork's biggest jump in total sales volume; Jamesport logged more transactions than a year earlier | Buyers priced out of the South Fork are finding room here, though inventory constraints are following them east. |
| Southold | Activity slowed, but the median held above $1.1 million | Prices are holding even where deal flow has thinned, echoing the same scarcity pattern seen across the South Fork. |
Worth noting for anyone comparing towns on tax alone: Southold carries the same 2.5 percent combined CPF and Community Housing Fund rate as Southampton and East Hampton. Riverhead is the only town in the region still at the original 2 percent, without the added housing surcharge.
What This Means Before You Write an Offer
The headline median is a useful signal of scarcity, not a stand-in for what your specific hamlet, price band, or house is actually worth. A few things worth confirming before you get to a closing table:
- Ask your closing attorney to calculate the exact Peconic Bay tax for your target town and price point, not just the headline percentage. The exemption cliff at $2 million in Southampton, East Hampton, Shelter Island, and Southold can change your effective rate more than the nominal 2.5 percent suggests.
- Confirm which party is customarily paying the transfer tax in that specific town. Local practice varies, and while the tax is often allocated to the buyer, contracts can and do shift that cost, so get it in writing early rather than assuming.
- If you're a first-time homebuyer, ask whether the town offers a CPF exemption. Southampton, East Hampton, and Shelter Island currently offer one; Southold and Riverhead do not.
- Treat the current median as a description of what's trading, not a forecast for what your specific offer should be. In the first quarter of 2026, transactions above $5 million reached a record share of Hamptons deals, and the median for luxury homes alone jumped 30 percent to $13 million, a very different number than the market-wide median most buyers see first.
A Few Questions We Hear Often
Is the Peconic Bay tax the same across every Hamptons town? No. Southampton, East Hampton, Shelter Island, and Southold currently charge 2.5 percent combined, the original 2 percent Community Preservation Fund tax plus the 0.5 percent Community Housing Fund surcharge added in 2023. Riverhead remains at 2 percent, without the housing fund addition.
Does the tax apply the same way to every price point? Not for improved residential property. Southampton's own guidance limits the $400,000 exemption to deals where the total consideration is $2 million or less. Above that line, the full purchase price is taxed, which is why two deals a few hundred thousand dollars apart can carry a meaningfully different effective tax rate.
Who typically pays the tax, buyer or seller? Custom varies by town and by deal. In practice it's frequently allocated to the buyer, though either party can agree to pay all or part of it in the contract. Confirm the allocation in writing well before closing rather than assuming it follows the same pattern everywhere on the East End.
A record median is a real number, and it's telling you something real about scarcity at the entry level. It isn't telling you what your specific house, in your specific hamlet, at your specific price, will actually cost to close on, especially once the Peconic Bay tax math is factored in. That's the kind of detail worth working through with someone who tracks these thresholds by town, not just by headline.
The Michael Graves Team advises buyers and sellers across the Hamptons on exactly this kind of transaction-level detail. Schedule a private consultation.
