A flip tax is a fee that a housing cooperative charges when a shareholder sells their shares, paid into the corporation's funds. It is not a government tax: despite the name, it is a private charge set by the co-op's own documents, and it can be worked out as a percentage of the sale price, a percentage of the seller's profit, or a fixed amount per share.
If you are buying, the flip tax is usually a seller's cost, but it shapes what the building can spend and what you will face when you sell later. If you are selling, it comes off your proceeds at closing. The searches "flip tax NYC" and "flip tax co-op" point to the same thing, because New York City has the largest stock of market-rate co-ops. This page explains the common formulas, shows hypothetical worked examples in a table, and tells you where to find the rate for a specific building. For the full picture of how a co-op sale works, see what is a co-op apartment.
What a flip tax is, and what it is not
The name suggests a tax on "flipping" an apartment for a quick profit. In practice, a flip tax is set by each building's own documents, and many apply to every sale, whether the owner held for six months or thirty years. Some buildings may vary the rate by how long the seller owned, so read the clause rather than assume. The money goes to the cooperative corporation, which can use it for building needs such as reserves, repairs or reducing the underlying mortgage, depending on the building's rules and board decisions.
It is also not a transfer tax levied by the state or city. Government transfer taxes are separate charges that may apply to your sale on top of any flip tax. Ask your closing attorney which government charges apply and who pays them.
The three common ways to calculate it
Buildings choose their own method. These are the three you will see most often:
| Method | How it works | Who it hits hardest |
|---|---|---|
| Percentage of the sale price | A set percentage of the gross price the shares sell for | Sellers of expensive apartments, whether or not they made a profit |
| Percentage of the profit | A set percentage of the sale price minus what the seller paid (sometimes adjusted for improvements, as the documents define) | Sellers with large gains; a seller who loses money may owe nothing |
| Fixed amount per share | A dollar rate multiplied by the number of shares allocated to the apartment | Owners of larger apartments, which carry more shares |
Some buildings combine methods or use a different formula for particular situations such as transfers between family members, but that is a matter for the individual building's documents. Do not assume an exemption exists; check.
Worked examples (hypothetical)
These numbers are invented to show how each formula behaves. They are not typical rates, and no real building is being described. Assume an apartment that the seller bought for $400,000 and sells for $550,000, with 1,000 shares allocated to the apartment.
| Formula in the building's documents | Calculation | Flip tax owed |
|---|---|---|
| 2% of the sale price | 2% x $550,000 | $11,000 |
| 5% of the sale price | 5% x $550,000 | $27,500 |
| 10% of the profit | 10% x ($550,000 - $400,000) | $15,000 |
| 25% of the profit | 25% x $150,000 | $37,500 |
| $10 per share | $10 x 1,000 shares | $10,000 |
| $30 per share | $30 x 1,000 shares | $30,000 |
Now see what the percentage-of-profit formula does when the market falls and the seller sells at a loss, for example at $380,000 after buying at $400,000:
| Formula | Calculation | Flip tax owed |
|---|---|---|
| 2% of the sale price | 2% x $380,000 | $7,600 |
| 10% of the profit | 10% x ($380,000 - $400,000) is negative | $0 |
| $10 per share | $10 x 1,000 shares | $10,000 |
Two lessons follow. A price-based or per-share fee is owed even in a loss, while a profit-based fee usually disappears when there is no profit. And the same rate name can produce very different bills depending on whether it applies to price or to profit, so read the exact wording before you estimate your net proceeds.
The profit formula also raises questions that the documents must answer: whether the "paid" figure includes the seller's capital improvements, whether closing costs count, and who verifies the figures. If those details are unclear in your building's documents, ask the managing agent and your attorney for the board's practice.
Who pays
The proprietary lease or bylaws normally state who pays, and in most buildings the seller does. The contract of sale between buyer and seller can still allocate the cost differently, because a buyer may agree to pay it as part of the deal. Never assume: confirm in the contract before signing. If the flip tax is large, it can affect negotiations over the price.
How a building sets a flip tax
A flip tax is not something a board can usually invent on the spot. It comes from the cooperative's governing documents, so the starting point is always your proprietary lease, bylaws and, in a converted building, the offering plan. In general:
- A building with a flip tax in its original documents charges it under those terms.
- A building that adds or changes a flip tax later has to follow the amendment process in its documents, which may require a shareholder vote of a stated size.
- A new flip tax or an increase may be introduced with notice to shareholders and may be set to apply only to future sales.
The exact approval percentage and procedure differ by building and by state corporate law. Check the building's documents and New York's Business Corporation Law with a co-op attorney. If you are on a board or a shareholder and are considering a change, treat that legal check as a required step.
Flip tax and your sale proceeds: a checklist
Use this list before you set a price or accept an offer:
- Find the flip tax clause in the proprietary lease, bylaws or house rules, and write down the formula in the document's own words.
- Ask the managing agent for a written payoff statement or transfer-fee quote for your unit. Many sellers ask for this early in the sale.
- Check whether the formula uses price, profit or shares, and whether improvements, closing costs or a spouse's contribution change the base.
- Check for any exemption (for example for transfers within the family or to a trust) and whether it requires an application.
- Confirm in the contract of sale who pays.
- Subtract the flip tax, any government transfer tax, broker fees, legal fees, and any outstanding share loan from your price to estimate net proceeds.
- Ask your attorney whether the flip tax affects your income-tax position on the sale.
Our resale calculator for limited-equity co-ops is built for capped resale prices rather than market-rate flip taxes, but it shows how a regulated formula limits a seller's proceeds and is a useful comparison when you are weighing a regulated co-op against a market-rate one.
Flip tax in regulated co-ops
Limited-equity and government-regulated co-ops often have their own resale formulas that split the profit between the seller and the corporation. New York City's Department of Housing Preservation and Development (HPD) says the sales of apartments in many HDFC co-ops are subject to a flip tax, under which the sale profit is divided between the selling shareholder and the HDFC, and its examples show a 70/30 and a 90/10 split of the profit. The split in a given building comes from its governing documents, any agreement binding it and its proprietary lease, not from a general rule. See HDFC co-ops and Mitchell-Lama co-ops for how restricted resales work in New York. A regulated co-op's resale agreement may override or replace what a market-rate co-op would handle through a flip tax.
Buying into a building with a flip tax
For a buyer, a flip tax is not a reason to walk away, but it does tell you something about the building and your future sale:
- A building that charges a flip tax may be building reserves or paying down debt through it. Ask how the money has been used.
- A high flip tax lowers what you net when you sell, so factor it in as a cost of ownership.
- Ask whether the flip tax has been raised before, and whether a change is under discussion.
- Ask your attorney whether a flip tax is mentioned in the offering plan or financial statements you are given.
See also the checklist of questions in what is a co-op apartment and the comparison table in housing cooperative vs condo. Condos do not normally have this type of fee, though some condo associations charge their own transfer or capital contribution fees on resale. Read the condo documents if you are weighing both.
Frequently asked questions
What is a flip tax?
A fee a cooperative charges when shares are sold, paid to the cooperative corporation. It is set by the building's documents and is not a government tax.
How much is a flip tax?
There is no single rate. Buildings set their own, using a percentage of price, a percentage of profit or a fixed amount per share. The tables above use invented numbers to show how each works. For a real building, get the clause and a payoff quote from the managing agent.
Is a flip tax the same in NYC as elsewhere?
The concept is the same. New York City has many market-rate co-ops, so flip taxes are discussed there most often, but the rate and method are chosen building by building. Other places may have different state corporate and housing laws, so check local rules.
Who pays the flip tax, the buyer or the seller?
Normally the seller, according to the building's documents, but a contract of sale can allocate it differently. Check the contract before you sign.
Can a co-op board change the flip tax?
Only through the process in the building's governing documents and the law that applies to the corporation. That process often involves a shareholder vote. Ask a co-op attorney to confirm for your building.
Is a flip tax tax-deductible or does it reduce my capital gains?
That depends on your circumstances and the tax rules in your country. Ask a tax adviser; do not assume it reduces your tax.
Do condos have flip taxes?
Condos do not normally have flip taxes in the co-op sense, but some associations charge resale or capital-contribution fees. Read the condo's documents.
Does a flip tax apply to HDFC and Mitchell-Lama co-ops?
Those co-ops usually follow their programme's or regulatory agreement's resale formula. See the HDFC and Mitchell-Lama guides.
Where to go next
References & further reading
This guide is researched against primary sources. Where we cite figures, they reflect the most recent data published by these organisations at the time of writing.
- 1.Cooperative resources & education — NCBA CLUSA
- 2.Cooperative identity, values & principles — International Cooperative Alliance
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