Picture two nearly identical Southampton houses, one priced at $1,995,000 and the other at $2,010,000. A buyer comparing them sees a $15,000 gap and assumes that is the whole story. It is not. Cross that line and the Peconic Bay Community Preservation Fund exemption a buyer would have claimed on the cheaper house disappears entirely, adding roughly $10,000 to the tax bill on top of the $15,000 price difference. The houses are fifteen thousand dollars apart. The closings are twenty-five thousand dollars apart.
That gap is not a rounding error or an attorney's mistake. It is how the Peconic Bay Region Community Preservation Fund, known locally as the CPF tax, is written into town code across most of the East End. And this year it matters to more buyers than it used to, because the Hamptons' own median sale price has moved to the wrong side of the line that triggers it.
The Exemption Does Not Fade. It Falls Off a Ledge
The CPF is a transfer tax paid by the buyer at closing in the five East End towns: East Hampton, Southampton, Shelter Island, Southold, and Riverhead. Since April 2023, the combined rate in East Hampton, Southampton, Shelter Island, and Southold has been 2.5 percent, made up of the original 2 percent preservation tax plus a 0.5 percent community housing surcharge that voters approved in 2022. Riverhead opted out of the surcharge and still collects the original 2 percent.
Improved residential property gets an exemption on the first slice of the purchase price, and here is the part that catches people off guard. According to Southampton Town's own FAQ on the tax, the first $400,000 of an improved parcel is exempt, but only where the consideration is $2,000,000 or less. Once a deal reaches that number, the exemption is not reduced. It is gone, and the tax applies to the entire purchase price from the first dollar.
Run the math on a $400,000 exemption at a 2.5 percent rate and the exemption itself is worth exactly $10,000 at closing. Southold's exemption is smaller, $200,000, which makes its version of the same cliff worth $5,000. Either way, the mechanism is identical: a buyer who structures or negotiates a deal to land at $1,999,000 keeps that credit. A buyer one dollar over the line loses all of it, instantly, with no phase-out in between.
The Median Just Walked Up to the Edge
For years this cliff mostly affected buyers already shopping well above the Hamptons' typical price point, which made it a footnote rather than a headline. That has changed. Second quarter 2026 figures compiled by William Raveis and reported by James Lane Post on August 3, 2026 put the Hamptons median sale price at $2.35 million for April through June, up 24.5 percent from the same quarter a year earlier. A separate market summary for the same quarter placed the median even higher, near $2.5 million. The exact figure moves depending on who compiled it, but every recent report agrees on direction: the typical Hamptons sale this year sits comfortably past the point where this exemption stops applying.
That is a genuinely new fact for the market, not a recycled one. CNBC reported in February 2026 that the median had already hit a record $2.34 million in the fourth quarter of 2025, up 34 percent year over year, with Wall Street bonus money cited as a driving force. A median that sat comfortably under $2 million two years ago now sits above it in back-to-back quarters. A tax break most closing guides describe as the default is now, for a majority-adjacent share of Hamptons transactions, unavailable.
The Same Rule Does Not Read the Same in Every Town
Anyone shopping across town lines should know the exemption is not uniform, and neither is the way each town treats the $2 million line.
| Town | Combined CPF Rate | Exemption on Improved Homes (price at or under $2,000,000) | Value of That Exemption |
|---|---|---|---|
| East Hampton | 2.5% | $400,000 | $10,000 |
| Southampton | 2.5% | $400,000 | $10,000 |
| Shelter Island | 2.5% | $400,000 | $10,000 |
| Southold | 2.5% | $200,000 | $5,000 |
| Riverhead | 2.0% | $150,000 | $3,000 |
Riverhead is the outlier in more than one way. It did not adopt the 0.5 percent housing surcharge that the other four towns added in 2023, so its rate stayed at the original 2 percent. Whether Riverhead also carries the same $2 million cutoff on its exemption is less settled than the other four towns. Some summaries of the 2023 legislation describe the new cliff as applying only to East Hampton, Shelter Island, and Southampton, with Riverhead's code left untouched by that particular amendment. Other sources list Riverhead alongside the rest with the same $2 million ceiling. Because Riverhead's town code was not part of the same 2023 amendment package, buyers there should confirm current treatment directly with the town or their closing attorney rather than assume it mirrors Southampton's rule.
Where the 0.5 Percent Actually Goes
The housing surcharge is not an abstraction on a closing statement. Assemblyman Tommy John Schiavoni's office reported that in the first quarter of 2026 alone, the Peconic Bay Region's real estate transfer tax generated $36 million for the original preservation fund and another $9 million for the newer housing fund, according to 27east.com's coverage from June 17, 2026. Since that housing fund began collecting in spring 2023, it has generated roughly $88.1 million across the region, with Southampton Town alone accounting for over $50.8 million of that total. Every dollar of the exemption a buyer loses at the $2 million mark flows into those same two accounts.
What to Ask Before You Sign Near the Line
A buyer or seller working a deal anywhere close to $2,000,000 in East Hampton, Southampton, Shelter Island, or Southold should treat that number as a real negotiating point, not a round one. A few questions worth raising with a closing attorney early, not the week before closing:
- How is "consideration" defined for this specific contract, and does it match the number on the purchase agreement.
- Does the exemption apply per conveyance rather than per buyer or per year, since the Peconic Land Trust describes the tax as assessed on each transaction.
- Is a first-time homebuyer exemption available for this purchase, since East Hampton, Southampton, Shelter Island, and Southold each offer one under separate income and price criteria, while Riverhead does not, according to a summary from Suffolk County estate attorneys at Twomey, Latham, Shea, Kelley, Dubin & Quartararo.
- Whether the property in question is a house or land purchase versus a co-op, since the CPF is structured around conveyances of real property and different ownership structures may be treated differently.
None of this is a reason to avoid a deal near $2 million. It is a reason to have the conversation with your attorney before the contract is drafted rather than after the exemption has already disappeared.
A Few Straight Answers
Does the $2 million line apply to the listed price or the final negotiated price? It applies to the consideration stated in the deed, which is the actual sale price agreed at closing, not the original list price.
Is the cutoff the same in all five towns? No. East Hampton, Southampton, and Shelter Island share the $400,000 exemption and 2.5 percent rate. Southold uses the same 2.5 percent rate with a smaller $200,000 exemption. Riverhead's treatment of the $2 million cutoff is less consistently described across sources, which makes it worth confirming directly for any Riverhead transaction.
Does the exemption ever partially apply above $2 million? Based on the town-published rules, no. The exemption is available in full below the $2,000,000 threshold and not at all at or above it. There is no partial or sliding version described in the current code.
Every Hamptons closing has its own arithmetic, and the CPF line is only one part of it. If you are pricing a sale near this threshold or trying to understand what a purchase will actually cost once every tax is accounted for, Irene Sarri has spent years working through exactly this kind of detail with East End buyers and sellers. Let's connect before you sign anything close to that number.
