Buying or selling in Water Mill comes with a few state-level taxes that can change your cash to close by tens of thousands of dollars. If you are new to New York, the terms can feel opaque and the timing unclear. You want a simple, accurate breakdown so you can plan with confidence and avoid last-minute surprises. This guide gives you exactly that and shows you how these costs are handled at contract and at closing. Let’s dive in.
What taxes apply in Water Mill
Water Mill is in Suffolk County, outside New York City. Two New York State taxes are most likely to affect your closing:
- Mansion tax: a 1% surcharge on residential purchases when the price is $1,000,000 or more.
- New York State real estate transfer tax (State RETT): $2 for every $500 of consideration, which equals 0.4% of the sale price.
New York City transfer taxes do not apply in Water Mill. You may still see other closing line items, such as mortgage recording tax, title costs, and Suffolk County recording fees, but those are separate from the two state taxes above.
How the taxes are calculated
Both taxes are based on the deal’s consideration. For most standard sales, that means the contract price. Here is how to run the numbers.
Mansion tax formula
- If the purchase price is $1,000,000 or more: Mansion tax = 1% × purchase price.
- Example: $2,500,000 purchase price → Mansion tax = 0.01 × $2,500,000 = $25,000.
State transfer tax formula
- State RETT = $2 per $500 of consideration. That equals 0.4% of the sale price.
- Example: $2,500,000 sale price → State RETT = 0.004 × $2,500,000 = $10,000.
Combined example in Water Mill
For a $2,500,000 residential purchase you might see:
- Mansion tax (buyer in practice): $25,000
- NY State RETT (commonly seller unless negotiated): $10,000
- Total state transfer-related taxes: $35,000
Who pays what in practice
New York law imposes these taxes at transfer. Who brings the funds is shaped by local custom and your contract.
Mansion tax responsibility
- In practice, the buyer pays the mansion tax.
- Your closing statement typically shows the mansion tax as a buyer charge.
- Some attorneys or listing teams ask the buyer to deliver the 1% at contract signing or place it in escrow. That is a contractual requirement, not a state law prepayment. Legally, the tax is due at closing.
State transfer tax responsibility
- The seller traditionally pays the 0.4% State RETT outside New York City.
- Your contract can shift this cost to the buyer, split it, or leave it with the seller. Do not assume. Confirm the clause before you sign.
Timing: contract vs closing
- By statute, neither tax is due at contract. Both are due at closing when the deed transfers and gets recorded.
- As a practical step, your attorney or title company may request funds in advance so there are no delays at closing. Follow their funding instructions.
Related costs to budget in Suffolk County
Beyond the two state taxes, plan for these common items:
- Mortgage recording tax: If you finance the purchase and record a mortgage, a separate mortgage recording tax applies. Rates vary by county and structure. This is usually a borrower cost.
- County and town recording fees: Suffolk County Clerk charges administrative fees to record deeds and mortgages. These are modest compared with the state taxes but still part of your cash to close.
- Local transfer levies: Statewide, the major transfer taxes are the mansion tax and State RETT. Check with the Suffolk County Clerk or your attorney for any local fees that might apply to your specific transaction.
- Title insurance and search: Title premiums and searches are standard buyer costs in New York. Your title company will quote them based on price and coverage.
- Nonresident seller withholding: If the seller is a New York nonresident, the buyer or closing agent may be required to withhold a portion of the proceeds for the seller’s potential New York income tax. This is separate from transfer taxes and can materially affect closing cash flow.
Special situations you should know
- Exempt transfers: Some transfers are exempt, such as specific government or non-profit transfers, certain transfers incident to divorce, or transfers with no consideration. Exemptions are narrow and document dependent.
- Co-op transfers: Sales of certain cooperative shares can trigger mansion tax and state transfer obligations. The rules follow state guidance for residential conveyances.
- Entity purchases: Buying through an LLC, trust, or other entity does not automatically avoid the mansion tax or the State RETT. Planning options are limited and fact specific. Speak with a New York tax attorney early if you are structuring ownership.
What to do at the offer and contract stage
Getting the tax responsibilities right starts before you sign.
- Confirm who pays the State RETT in the contract. Ask your attorney to review the clause and explain the local custom for Water Mill.
- Clarify if the buyer must deliver mansion tax funds at contract or only at closing. If early funding is required, plan your escrow or wire timing.
- If you are financing, ask your lender and title company for a cash-to-close estimate that lists mansion tax, State RETT, mortgage recording tax, and recording fees separately.
- If the seller is a nonresident, start the withholding process early to avoid last-minute holdbacks or delays.
Buyer checklist: Water Mill closings at or above $1M
- Budget an extra 1% of the purchase price for the mansion tax.
- Ask your attorney if you must fund the mansion tax at contract. If yes, arrange the wire or escrow.
- Review your contract for the State RETT clause. If you are taking on any portion, add 0.4% of price to your closing budget.
- Get a written closing cost estimate from your attorney or title company that lists state taxes, mortgage recording tax, title charges, and recording fees.
- Confirm with your lender how mortgage recording tax will be handled and when funds are needed.
Seller checklist: Water Mill listings at or above $1M
- Expect to pay the 0.4% State RETT unless your contract shifts it to the buyer or splits it.
- If you are a nonresident of New York, prepare for potential withholding from your sale proceeds and work with your tax advisor on forms and timing.
- Coordinate with your attorney on deed recording instructions and fee estimates from the Suffolk County Clerk.
- If the buyer requests a price reduction before closing, remember that state taxes are calculated on the final consideration. Any renegotiated price will change the tax amounts.
Estate planners and entity buyers: key reminders
- Do not rely on entity structure to avoid transfer taxes. The mansion tax and State RETT generally apply to residential acquisitions regardless of ownership form.
- If you are transferring between related entities or trusts, evaluate whether an exemption applies and what filings are required. The details matter.
- Start early on any nonresident withholding questions when a trust or nonresident seller is involved.
Avoid common surprises
- Price rounding matters: If your price is exactly $1,000,000 or more, the mansion tax applies. If it is $999,999, it does not. Avoid assumptions on either side of that line and document the final price clearly.
- Appraisal changes: The mansion tax and State RETT are based on the deal’s consideration, not the appraisal. If you renegotiate the price before closing, the tax recalculates on the new amount.
- Contract clarity: Put tax responsibility and timing in writing. Do not rely on custom alone.
The bottom line for Water Mill
For most Water Mill transactions at or above $1,000,000, you should plan for two state-level taxes at closing: the 1% mansion tax and the 0.4% State RETT. In practice, buyers carry the mansion tax, and sellers commonly pay the State RETT unless the contract says otherwise. Add mortgage recording tax if you are financing, plus Suffolk County recording fees and title costs. If a nonresident seller is involved, include withholding in your cash-flow plan.
If you would like a tailored estimate and strategy for your Water Mill purchase or sale, reach out for a calm, data-first review of your goals, timeline, and budget. Request a Personal Market Consultation with Michael Petersohn for clear next steps and a smooth closing experience.
FAQs
What is the mansion tax for Water Mill home purchases?
- New York’s mansion tax is a 1% surcharge on residential purchases when the price is $1,000,000 or more. It applies in Water Mill and is typically paid by the buyer at closing.
How is the New York State transfer tax calculated in Suffolk County?
- The State RETT is $2 for every $500 of consideration, which equals 0.4% of the sale price. It is commonly shown as a seller cost unless the contract shifts it.
Do New York City transfer taxes apply to Water Mill sales?
- No. NYC transfer taxes apply only within the five boroughs. Water Mill is in Suffolk County, so NYC-specific taxes do not apply.
When are these taxes due if I sign a contract now?
- By law, both taxes are due at closing when the deed transfers and is recorded. Some contracts require the buyer to escrow the 1% mansion tax earlier, which is a contractual requirement, not a statutory one.
Can buying through an LLC or trust avoid the mansion tax?
- Not automatically. Entity ownership does not by itself avoid the mansion tax or State RETT. Any potential exemptions are narrow and fact specific.
What other closing costs should I expect in Water Mill?
- Common items include mortgage recording tax if you finance, Suffolk County recording fees, title insurance and searches, and possible nonresident seller withholding if the seller is not a New York resident.
