Peconic CPF exemption playbook.

The CPF taxes the amount above a town-specific exemption threshold. Without any further claim, every qualifying residential buyer in the five CPF towns gets at least the basic exemption applied:

The basic exemption applies automatically — the closing attorney files the standard CPF return (Form HEP) with the town and the exemption is reflected on the tax calculation. No additional documentation needed beyond standard closing paperwork.

The dollar value

On a $5M East Hampton or Southampton purchase, the basic exemption saves $10,000 ($400K × 2.5%). Modest but automatic. The real money comes from the additional exemption layers.

The improved-property exemption is the largest CPF exemption available to typical HNW buyers. It allows an additional reduction in the CPF taxable amount for the value of structures and improvements already on the property at the time of purchase — as opposed to the land value alone.

The structure

The exemption is calculated as a percentage of the purchase price equal to the percentage of value attributable to existing structures and improvements, as determined by the most recent town assessor’s separately-stated improvement value.

The town tax assessor publishes separately-stated land and improvement values for every assessed parcel. The improvement portion gets applied as an additional CPF exemption.

Example: a $5M Bridgehampton single-family

Town assessor’s values: land $2M, improvements $3M. Improvement portion: 60%.

Standard CPF calculation (basic exemption only): ($5M – $400K) × 2.5% = $115,000.

With improved-property exemption: 60% of the $4.6M taxable base is exempt = $2.76M more exempted. Effective CPF taxable: ($5M – $400K – $2.76M) × 2.5% = $46,000.

Savings: $69,000.

The catch

The improvement value used is the town assessor’s valuation — which often lags actual market value substantially. Towns may not reflect recent construction or renovation improvements in the assessment for several years. For older buildings with limited assessor-recognized improvements, the exemption may be smaller than you’d expect.

For new construction or recently-renovated properties, there may be a lag period where the town assessment hasn’t caught up to the actual improvements — in which case the exemption available may be less generous than the actual improved value.

For buyers establishing the Hamptons as their primary residence, additional exemption provisions apply at several towns. This is the carve-out for the relatively small share of Hamptons buyers who actually treat the property as their primary residence rather than a second home.

The structure varies by town

East Hampton, Southampton, and Shelter Island all have primary-residence provisions but the specifics differ. Generally:

• Buyers establishing primary residence in the town can claim an additional exemption — sometimes the full town assessor’s improvement value, sometimes a fixed dollar amount
• Documentation required: NYS resident return at the address, voter registration, driver’s license, actual physical presence patterns
• The exemption typically requires multiple years of continuous primary residence (typically 5 years) to fully vest

The practical eligibility

For most HNW Hamptons buyers, primary residence is the Hamptons home + a Manhattan pied-à-terre (or similar). Establishing the Hamptons as legal primary residence requires the full residency move described in our tax-residency planning pillar — driver’s license, voter registration, NYS resident return at the Hamptons address, etc.

For year-round HNW Hamptons residents who’ve completed the residency move, the primary-residence exemption is meaningful and worth claiming.

CPF carries broad exemptions for certain qualifying family transfers — generally transfers between specific family relationships are exempt from CPF entirely, regardless of purchase price.

Qualifying relationships

The exemption typically applies to transfers between:

• Spouses (during marriage or via divorce settlement)
• Parent and child
• Grandparent and grandchild
• Siblings
• Transfers into qualifying revocable trusts where the grantor and beneficiary are the same person
• Transfers from an estate to the beneficiary

What it doesn’t cover

• Transfers between in-laws (parent-in-law to child-in-law, etc.)
• Transfers between cousins
• Transfers into irrevocable trusts with non-family beneficiaries
• Transfers to corporations or LLCs (even family-held ones) typically don’t qualify

The structural opportunity

For HNW Hamptons families planning multi-generational ownership, the family-transfer exemption is a major structural opportunity. A parent purchasing for $20M and eventually transferring to a child by gift (or in estate) doesn’t trigger CPF on the family transfer — the only CPF is on the original purchase.

Compare to a structure where the property is held in an LLC and the LLC interest is transferred to a child: that’s typically a taxable transfer for CPF purposes. The choice of holding structure has material CPF implications.

Several CPF towns offer specific first-time homebuyer exemption programs. These typically don’t apply to HNW transactions because of the purchase-price limits involved, but worth mentioning for completeness.

Southampton first-time homebuyer

For buyers purchasing in Southampton who haven’t previously owned property in NY State, additional exemption may apply on the first $200,000 of value above the basic exemption. Price limits apply — for trophy transactions, this generally doesn’t come into play.

East Hampton first-time homebuyer

Similar structure with different specific terms. Again, generally subject to price limits that exclude typical HNW transactions.

The practical relevance for HNW buyers

For HNW buyers above the price-limit thresholds, the first-time-homebuyer programs don’t apply. But for buyers structuring trust or family entity ownership specifically to allow a younger family member to take first ownership (e.g., a parent funds the purchase via gift to an adult child who then buys), it’s worth checking whether the first-time-buyer exemption applies to the actual purchasing entity. This is structuring- dependent.

For purchases above $2M in some towns, certain exemption provisions phase out or carry additional limits. The specifics vary by town and have been amended over the years.

What to verify

• Whether the improved-property exemption applies fully or is phased out above your purchase price
• Whether the primary-residence exemption has price-based limits in your specific town
• Whether any town-specific surcharges apply at higher price tiers

The practical posture

For purchases above $2M, the assumption that “the basic exemption applies” is not enough. The town-specific exemption rules need to be reviewed individually for each transaction. Your closing attorney should be specifically asked about the exemption analysis at your price point and town.

For trophy purchases ($10M+), engaging an attorney with substantial Hamptons CPF experience is worth the cost. The exemption analysis can save tens of thousands of dollars but requires town-specific knowledge.

Pre-LOI

• Request the town’s most recent assessment showing separately-stated land and improvement values
• Ask the listing broker about any specific CPF exemption history or town treatment for the property
• For primary-residence exemption posture, confirm the town’s specific documentation requirements

Pre-contract

• Have closing attorney run the full exemption analysis for your specific purchase price and town
• Verify the assessor’s separately-stated values are current and reflect the actual improvements
• Identify which additional exemptions you plan to claim (primary residence, family transfer, etc.)

At closing

• Complete the standard CPF return (Form HEP) with all exemptions correctly claimed
• File any town-specific exemption applications required for primary-residence or family-transfer treatment
• Wire the calculated CPF to the town with the standard closing payments

Post-closing

• File any additional residency documentation required to preserve primary-residence exemption status
• Maintain the documentation supporting any claimed exemption — towns can audit after the fact
• For primary-residence claims, file annual updates as required by town procedure

Example 1: $5M Bridgehampton single-family, second home

Town assessor: $2M land, $3M improvements. Buyer treats as second home (no primary-residence claim).

• Basic exemption: $400K
• Improved-property exemption (60% of remaining $4.6M): $2.76M
• CPF taxable: $5M − $400K − $2.76M = $1.84M
• CPF due: $1.84M × 2.5% = $46,000

Vs. without improved-property exemption: $115,000. Savings: $69,000.

Example 2: $15M East Hampton trophy estate, year-round residence

Town assessor: $4M land, $11M improvements. Buyer making full primary-residence move to East Hampton (NY exit).

• Basic exemption: $400K
• Improved-property exemption (73% of remaining $14.6M): $10.66M
• Primary-residence additional carve-out (town-specific): ~$300K
• CPF taxable: $15M − $400K − $10.66M − $300K = $3.64M
• CPF due: $3.64M × 2.5% = $91,000

Vs. without any exemption: $375,000. Savings: $284,000.

Example 3: $3M Sag Harbor purchase from parent (family transfer)

Adult child purchasing from parent at fair-market price. Both are NY residents; structured as direct family transfer.

• Family-transfer exemption: 100%
• CPF due: $0

Vs. arms-length sale to a third party: $65,000. Savings: $65,000.