NYC Affordability

What it is, and why it exists

A flip tax is a transfer fee a co-op corporation charges on the sale of shares, paid out of the proceeds when an apartment sells. Unlike the mansion tax or mortgage recording tax, it isn’t set by any government — it’s written directly into the building’s proprietary lease or bylaws, which means every co-op sets its own rate, its own structure, and its own rules for who pays. Some buildings have no flip tax at all.

Buildings adopt a flip tax as a way to raise money for capital improvements, reserve funds, or general operating costs without raising monthly maintenance or issuing an assessment against every current shareholder. Because it’s only charged to shareholders who choose to sell, boards often find it the path of least resistance politically — current residents who aren’t selling never feel it directly.

How much it typically costs

At most standard NYC co-ops, flip tax runs 1% to 3% of the sale price, with Manhattan buildings averaging closer to 2%. On a $900,000 sale at the 2% average, that’s $18,000 coming out of the seller’s proceeds.

HDFC co-ops are the major exception. These are income-restricted buildings created through NYC’s Housing Development Fund Corporation program — subject to Article XI of the state’s Private Housing Finance Law, which generally caps eligible buyer income at 165% of Area Median Income by default (individual buildings can set stricter limits in their own offering plan). Because HDFC apartments are sold well below market rate to preserve affordability, many of these buildings charge a much steeper flip tax — commonly around 30% of the seller’s profit, and at some buildings as much as 70% of the total sale price — specifically to discourage buyers from treating a subsidized unit as a short-term investment and to recapture some of the below-market discount for the building’s benefit when a unit does resell.

How it can be structured

Flip tax isn’t always a flat percentage of sale price. Buildings structure it a few different ways, and it matters which one applies to you:

• Percentage of gross sale price — the most common structure, straightforward to calculate.
• Percentage of profit (sale price minus original purchase price) — less common, but can produce a very different number than a gross-price percentage, especially after a long hold with significant appreciation.
• Flat fee — a fixed dollar amount regardless of sale price, more common at smaller or older buildings.
• Per-share amount — a dollar figure multiplied by the number of shares allocated to the unit, an older structure some pre-war buildings still use.

Some HDFC buildings scale the percentage down the longer you’ve owned the unit, as an incentive against flipping shortly after a below-market purchase.

Who pays

By convention — not by law — the seller pays the flip tax in the large majority of NYC co-op sales. It isn’t universal: a proprietary lease can assign it to the buyer, or split it, though this is uncommon outside of specific negotiated deals. Even when a building’s bylaws technically assign the fee to the buyer, market practice tends to route around it: if a seller tries to shift a 2% flip tax to the buyer, buyers typically respond by offering roughly 2% less, so the economic burden lands close to the seller either way.

Worked example

Take a co-op purchased for $700,000 and sold five years later for $850,000, at a building with a standard 2% flip tax on gross sale price:

• Sale price: $850,000
• Flip tax (2% of sale price): $17,000
• Seller’s net proceeds before flip tax: $850,000 − original mortgage payoff − standard closing costs
• Flip tax reduces those net proceeds by an additional $17,000 on top of standard seller closing costs (attorney fees, any outstanding assessment payoff, managing agent fees)

Compare that to an HDFC building charging 20% of profit on the same sale: profit of $150,000 ($850,000 − $700,000) × 20% = $30,000 — nearly double the standard building’s flat 2%-of-price flip tax, despite a lower sale price, because the structure and rate are both steeper.

Where to find your building’s rate

Flip tax terms live in the proprietary lease and the co-op’s bylaws — documents your broker or attorney can pull during due diligence, well before you’re anywhere near a resale. It’s worth checking before you buy, not just before you sell: a steep flip tax is a real cost of eventually exiting the building, and it’s one of the reasons co-ops and condos aren’t a simple apples-to-apples comparison on total cost of ownership. See our co-op vs condo cost guide for how flip tax stacks up against the costs unique to condo ownership.