The Complete Guide to Co op Flip Taxes in NYC

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What is the average flip tax in New York City and who pays it? We will demystify this topic in the following video. I’m Nick at Hauseit. Visit our website https://www.hauseit.com to learn about ways to save money when buying or selling real estate here in New York City, so let's get started.

The average co-op apartment flip tax in New York City is 1% to 3% of the sale price and it's customarily paid by the seller. The flip tax varies by building and in rare instances you may even encounter a condominium which charges a flip tax. A flip tax in New York City can be structured as a percentage of the sale price, a flat fee, a per share amount or some combination of the methods above.

The flip tax is payable in addition to all other seller closing costs such as broker fees and the New York City and New York State transfer taxes. You can calculate your co-op flip tax using Hauseit's interactive co-op flip tax calculator, and if you're thinking of selling you might also want to check out our seller closing cost calculator, our net proceeds sale calculator or our capital gains calculator all of which are available at https://www.hauseit.com.

The flip tax charged by a building is typically documented in its proprietary lease and bylaws. Flip taxes came about during the 1970s housing crisis in New York City. During this time, there was a wave of co-op conversions throughout the city as buildings were privatized. The buildings being privatized were often rundown and in dire need of major capital investment. At the same time, many of the rent stabilized tenants who resided in these buildings were offered substantially discounted insider prices to purchase.

To prevent flipping and to address the major capital investment needs of these buildings, many co-ops implemented flip taxes on resales. Flip taxes can be structured in any of the following ways: percentage of the gross sale price such as 1.5% of the purchase price, a set dollar amount per co-op share owned such as $50 a share, a flat fee amount such as $2,500 flat or a percentage of sale profits such as 15% of profits. It could also be a hybrid format such as $2,000 plus $25 a share.

So, who pays the flip tax in New York City? Well, the flip tax is usually paid by sellers however everything is negotiable. And in rare instances, the co-op may specify that the flip tax is paid by buyers, which party is paying the assessment is spelled out in the purchase contract. Flip taxes charge to buyers are often phrased as capital contribution fees and this is more common to see with condo buildings. A typical capital contribution is usually a few months’ worth of common charges or some fixed contribution amount.

Can a co-op or condo in New York City change its flip tax? Yes, a co-op or condo can change its flip tax by amending the proprietary lease and bylaws by receiving approval from a majority of the shareholders. Flip taxes cannot be unilaterally imposed by the board without a shareholder vote. Our real estate flip taxes in New York City tax deductible, you can usually reduce your taxable capital gains as a seller by subtracting the flip tax as an additional cost of the sale alongside broker commissions for example. With that said, we suggest you consult your real estate attorney and tax professional for specific advice. Our flip tax is payable on transfers to family members.

Most buildings will waive the flip tax if you are transferring your co-op to a family member or spouse. However, each building has its own language and exceptions for the flip tax. The only way to confirm whether family transfers are exempt from a flip tax is to check in the proprietary lease and co-op building bylaws.

We hope you found this video helpful. I'm Nick at Hauseit. Visit our website https://www.hauseit.com to learn ways to save if you're buying or selling here in New York City. And if you liked this video, do us a favor hit like, subscribe, leave us a comment and we'll see you on the next one!

Save 2% When Buying in NYC: https://www.hauseit.com/hauseit-buyer-closing-credit-nyc/
NYC Buyer Closing Cost Calculator: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
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