Understanding the transfer fee that can cost you thousands when selling your co-op.
You've owned your Manhattan co-op for a decade. The market has appreciated. You're ready to sell and capture that equity. Then your broker mentions the flip tax, and suddenly your expected proceeds drop by $30,000, $50,000, or more.
Flip taxes catch many co-op sellers off guard. Unlike government transfer taxes that apply to all real estate sales, flip taxes are building-specific fees imposed by cooperative corporations on shareholders who sell their units. They vary dramatically between buildings—some co-ops have none, others take 2-3% of the sale price—and the structure determines whether you're paying a modest fee or a significant chunk of your profit.
Understanding flip taxes before you buy, and certainly before you sell, prevents unpleasant surprises and allows realistic financial planning.
A flip tax is a transfer fee paid to the cooperative corporation when a shareholder sells their apartment. Despite the name, it's not actually a tax—it's a contractual obligation specified in the building's proprietary lease or house rules.
The fee typically goes into the building's reserve fund or operating account, benefiting remaining shareholders by:
Flip taxes emerged in New York co-ops during the 1970s and 1980s, partly as a response to speculative buying during market booms. Buildings wanted to capture some appreciation for the cooperative while discouraging investors who might flip units quickly for profit.
Flip taxes come in several structural varieties. The calculation method dramatically affects your actual cost.
The most common structure: a flat percentage of the gross sale price, regardless of your profit or how long you've owned.
| Sale price | $1,500,000 |
|---|---|
| Flip tax rate | 2% |
| Flip tax owed | $30,000 |
Typical rates: 1-3% of sale price
Some buildings calculate the flip tax as a percentage of your net profit (sale price minus original purchase price and capital improvements).
| Sale price | $1,500,000 |
|---|---|
| Original purchase price | $900,000 |
| Capital improvements | $100,000 |
| Net profit | $500,000 |
| Flip tax rate | 10% of profit |
| Flip tax owed | $50,000 |
Typical rates: 10-30% of profit
Some co-ops charge a fixed dollar amount per share being transferred.
| Shares allocated to unit | 500 |
|---|---|
| Flip tax rate | $25 per share |
| Flip tax owed | $12,500 |
Typical rates: $10-50 per share
Many buildings reduce flip taxes for longer-term owners, rewarding those who've contributed to community stability.
| Years Owned | Flip Tax Rate |
|---|---|
| 0-2 years | 3% of sale price |
| 2-5 years | 2% of sale price |
| 5-10 years | 1% of sale price |
| 10+ years | 0.5% of sale price |
Some buildings combine methods:
Always review the exact language in your proprietary lease—nuances matter significantly.
In nearly all cases, the seller pays the flip tax. It's deducted from proceeds at closing, reducing the net amount the seller receives.
In some cases, negotiation may allow partial transfer to buyers, but most transactions leave the flip tax with the seller.
| Line Item | Amount |
|---|---|
| Expected sale price | $1,200,000 |
| Less: Broker commission (5%) | -$60,000 |
| Less: Flip tax (2%) | -$24,000 |
| Less: Transfer taxes (~1.4%) | -$16,800 |
| Less: Attorney fees | -$3,000 |
| Less: Payoff existing mortgage | -$400,000 |
| Net proceeds | $696,200 |
Factor flip taxes into long-term planning. Buildings with lower or no flip taxes offer better liquidity and flexibility for future sales.
| Tax Type | Who Pays | Rate | Goes To |
|---|---|---|---|
| NYC Real Property Transfer Tax | Seller | 1% under $500K, 1.425% over | City of New York |
| NYS Transfer Tax | Seller | 0.4% | State of New York |
| Co-op Flip Tax | Seller | 0-3% (varies) | Building reserve fund |
| Mansion Tax | Buyer | 1-3.9% (over $1M) | State of New York |
HDFC co-ops often impose higher flip taxes, sometimes 20-30% of profit or sale price, to preserve affordability, discourage speculation, and fund building improvements.
Flip taxes reduce your capital gain for tax purposes.
| Item | Amount |
|---|---|
| Sale price | $1,200,000 |
| Original purchase price | $700,000 |
| Capital improvements | $50,000 |
| Broker commission | $60,000 |
| Flip tax | $24,000 |
| Other selling costs | $5,000 |
| Taxable capital gain | $361,000 |
Primary residence exclusion may apply, reducing taxable gain by up to $250,000 ($500,000 for married couples), but flip taxes still reduce gain before applying the exclusion.
Flip taxes are a fact of co-op ownership in New York City. They fund building reserves, discourage speculation, and support community stability, but significantly impact net proceeds. Smart buyers and sellers plan accordingly, review building rules, and calculate net proceeds in advance.
Francine Crocker ensures her clients understand all transaction costs—including flip taxes—before making offers or listing properties. Her detailed analyses help sellers price strategically and buyers evaluate true ownership costs. No surprises at closing.
Let’s have a conversation — whether you’re ready to list or just exploring your options. I bring experience, perspective, and care to every client relationship.