NYC Flip Tax Explained: What It Is, How It’s Calculated, and Who Pays (2020)
Go Back To Previous PageThrough this guide, NestApple will help you understand the flip tax in New York real estate. It is not a true tax. All of it goes to the building, not the government. We’ll explore common questions about Coop. flip tax NYC, including how they work, who pays them, and what types of properties they apply to. New Yorkers came up with this concept to increase revenues in buildings.
By imposing a flip tax in NYC, sellers are reluctant to flip apartments, reducing the building turnaround. Additionally, buildings with flip taxes often have fewer assessments. They may also have lower debt due to this additional funding source.
If you’re buying or selling in New York City, one cost that often gets overlooked is the flip tax. While it may not apply to every property, it can greatly affect your total transaction costs. This is especially true in co-op buildings. This guide explains it is, how it works, and what you should expect in a real NYC deal.
What is a flip tax in New York real estate?
The name “Flip Tax” is a little deceiving. This expense is not a tax. For example, it is different from your typical transfer taxes. Instead, it’s a payment for the transfer of property between a seller and a buyer.
A flip tax is a fee set by a coop or a condo. It is collected when a unit is resold. The fee goes to the co-op or condominium, not the seller. A flip tax is a building transfer fee charged when a unit is resold. The co-op or condo usually keeps the proceeds, not the seller
It’s not part of property taxes. It is only a fee implemented by a building.
The percentage is calculated based on the sale price. The flip tax includes all other seller closing costs, such as broker commissions and the NYC & NYS transfer taxes paid.
When and why did the flip tax in New York real estate come about?
Flip taxes emerged as a solution during New York City’s 1970s housing crisis. That era saw a wave of co-op conversions across the city as 
buildings were privatized. These buildings were frequently dilapidated and desperately needed substantial capital investment. In the 1970s and 1980s, when many rundown rental properties were converted into co-ops, significant renovations were necessary.
Improvements cost money, and many buildings were left with very little. The tenants (mostly rent-controlled) could sell their apartments at a huge profit. As a result, they now had funds to contribute and build up reserves for the future if they left.
It is legal for co-ops to charge these fees, but only if the proprietary lease lists them. The co-op must also approve them.
First, the tax still discourages flipping. Regardless of the owner, the tax discourages short-term ownership periods. These taxes are one reason short-term apartment ownership in NYC makes no sense.
How much is the flip tax in New York buildings in a typical co-op?
The majority were calculated as a percentage of the gross sale price. Other ways included:
- A % of the seller’s capital gain
- A fixed amount per coop share
- A fee that decreases the longer you hold the apartment
The average flip tax in NYC ranges from 1% to 3% of the purchase price. The amount varies by building, and in rare instances, you may also encounter a condo in New York City that charges a flip tax. The amount is not set in stone; each building has its own regulations and specifications.
In practice, most buildings cluster in a narrow range, with many fees near the low single digits. Some outliers exist, depending on the building’s policies.
The typical range remains between 1 and 3%, but 2% seems to be the magic number.
Most co-ops have some flip tax. As an example, a resale priced near $1.3M with a mid-range building fee can result in a five-figure transfer charge. It often ends up in the mid-$20,000s. For a higher-end resale, the building’s transfer fee can reach tens of thousands of dollars. Even small price changes can push the cost into the mid-five figures.
Do condos have flip taxes?
Flip taxes are less common in condominiums, but they do exist.
When present, they are typically:
- Lower than in co-ops
- Structured as a % of the sale price
- Applied more consistently across units
Are they only for co-op buildings, or do condos have them too?
In general, we only find flip taxes paid on transactions involving NYC co-op properties.
Most condo sales do not have this additional fee, so buyers/sellers don’t pay that amount. Everyone agrees that co-op boards have the authority to implement it. However, some NYC real estate lawyers have argued that condos can impose flip taxes, though such taxes remain rare.
Who pays the flip tax, and is it tax-deductible?
Flip tax remains a typical “New York Real Estate concept” typically paid by the seller. However, asking the buyer to pay that cost sometimes 
happens in the context of a home purchase or a bidding war. Some sellers force buyers to pay it, and others agree to split it.
Regardless of who’s covering the costs, this is an important concept to remember. Please include this cost in your calculations for your next purchase.
The flip tax is tax-deductible. You can lower your taxable capital gains. Do this by subtracting it as an extra closing cost.
Can buildings change their flip tax?
Yes. A building in NYC can change its flip tax. It can do this by amending its bylaws. A majority of shareholders must approve it.
The board cannot unilaterally impose them without a shareholder vote. Most buildings will waive this cost if you transfer your co-op to a spouse, partner, child, or close family member.
Can you avoid paying it?
You cannot avoid paying the flip tax, but you can try to mitigate your closing costs in other ways. For example, if you’re selling in a hot market,
you can ask the buyer to cover it, or you can work with a broker like NestApple that charges lower commissions to sell your property.
Flip taxes began as a helpful way for buildings to earn money. Now, they have become just another way for buildings to make income. NYC real estate has fully included it. All buyers should know how it might affect their finances.
In practice, buyers often focus on the purchase price. They may underestimate building-level costs, like transfer fees. These costs can significantly affect the total closing economics
How to find a building’s flip tax
To determine whether a property has a flip tax, review:
- The offering plan
- Financial statements
- Purchase application package
Your attorney or broker should confirm:
- Whether it applies
- How it is calculated
- Who is responsible for payment
Key takeaway
A flip tax doesn’t change the market value of a property, but it directly impacts your net proceeds or total cost. Understanding it early allows you to:
- Price correctly
- Negotiate more effectively
- Avoid surprises at closing
Get expert guidance
At NestApple, we help buyers and sellers with every step of NYC real estate transactions. We also help manage building-level costs, such as flip taxes. If you’re evaluating a property, we can help you understand the full financial picture. This helps you before you make an offer.
Georges has been working in Wall Street for the last 16 years trading derivatives with hedge funds. He has been an active real estate investor for over a decade. Georges graduated from HEC Business School in Paris and holds a master in Finance from ESADE Barcelona.
