Co-op Flip Tax: What It Is and Who Pays
A co-op flip tax is a transfer fee paid to the building when shares are sold. See how it is calculated, where the rule is written, who pays and the tax angle.
5 min read · Updated
A co-op flip tax is a fee the co-op corporation charges when an apartment's shares are sold. It is not a government tax: the money goes to the building, and the amount and who owes it are set in the building's own documents.
In practice it is usually treated as a seller's cost, but your contract can shift it, so check the documents before you price your apartment or make an offer.
At a glance
- Paid to
- The co-op corporation
- Not the city or state
- Where the rule lives
- Proprietary lease
- Or occupancy agreement / offering plan
- Legal basis in NY
- BCL §501(c)
- Allows transfer fees in co-op documents
- Common methods
- % of price, % of profit, per share
- Some use a flat fee
- Is there a standard rate?
- No
- Each building sets its own
Where the flip tax rule is written
New York's Business Corporation Law §501(c) is what makes flip taxes possible. It says shares of the same class in a cooperative housing corporation are not treated as unequal just because of different fees payable to the corporation on a sale or transfer, when those fees are provided for in proprietary leases, occupancy agreements or offering plans and the conditions in the statute are met (substantially equal liquidation rights per share, maintenance and assessments set on a uniform basis, and roughly equal voting rights).
In practice, you will find the flip tax in one of these places:
- The proprietary lease, often in the section on assignment or transfer.
- The offering plan or an amendment to it.
- The occupancy agreement, in co-ops that use one.
- The managing agent questionnaire in the due diligence package, which summarizes it (see the co-op due diligence checklist).
The common ways flip taxes are calculated
| % of sale price | % of profit | Per share | Flat fee | |
|---|---|---|---|---|
| Based on | Gross price | Price minus original cost | Shares allocated to the unit | Fixed dollar amount |
| Easy to calculate | ||||
| Grows with the price | ||||
| Charged even with no profit | ||||
| Needs records of your purchase price |
A percent-of-profit flip tax needs a definition of “profit.” Some buildings subtract only your purchase price; others also allow improvements or selling costs. A building's documents can also combine methods or list exemptions. Only your building's documents tell you which.
Worked example: one sale, four methods
You bought a one-bedroom co-op for $700,000 and sell it for $1,000,000. The apartment carries 500 shares. The rates below are examples only, not typical or recommended rates.
| Method | Example rule | Calculation | Flip tax |
|---|---|---|---|
| % of sale price | 2% of gross price | $1,000,000 × 2% | $20,000 |
| % of profit | 20% of profit | ($1,000,000 − $700,000) × 20% | $60,000 |
| Per share | $20 per share | 500 × $20 | $10,000 |
| Flat fee | $5,000 per transfer | — | $5,000 |
The spread is wide: $5,000 to $60,000 on the same sale. Now suppose the market fell and you sold for $650,000, below what you paid. The percent-of-profit method would charge nothing, while 2% of price would still be $13,000. Try your own numbers in the flip tax calculator.
Who pays: buyer or seller?
The building's documents say who owes the fee to the co-op. Separately, the buyer and seller can agree in the contract of sale which of them actually bears the cost. That makes it negotiable in practice:
- Seller pays: a common arrangement. It is deducted from the seller's proceeds at closing, like the broker commission and transfer taxes (see NYC seller closing costs).
- Buyer pays: some buildings assign it to the buyer, and in a slow market a seller may ask the buyer to take it on. A buyer should count it as a closing cost.
- Split: the contract can divide it, sometimes in exchange for a price change.
How the flip tax is treated for income tax
A flip tax is a fee paid to the co-op corporation, not a tax imposed by a government, so it is not a property tax you can deduct as a state and local tax. When you sell, IRS Publication 523 calculates your gain as the amount realized (sale price minus selling expenses) minus your adjusted basis. The publication lists sales commissions, advertising and legal fees as selling expenses, and it confirms that a co-op apartment can be your main home for the home sale exclusion of up to $250,000 of gain ($500,000 for married couples filing jointly).
Publication 523 does not mention flip taxes by name. Ask your tax preparer whether a flip tax you pay counts as a selling expense that lowers your amount realized. If your gain is below the exclusion anyway, the question may not change your tax. Estimate it with the home sale capital gains calculator.
Steps to handle the flip tax in a sale
- 1
Get the clause
Ask the managing agent for the flip tax provision and any exemptions, before listing (seller) or before contract (buyer). - 2
Gather your numbers
For a percent-of-profit rule, find your closing statement from when you bought and any records the building accepts for improvements. - 3
Agree who pays in the contract
Your attorney writes it into the contract of sale. If it is split or shifted, say so explicitly. - 4
Confirm the figure before closing
The managing agent provides the amount due; it appears on the closing statement and is paid to the co-op at closing. - 5
Keep the paperwork for taxes
Save the closing statement showing the flip tax, for your tax preparer.
Re-verified 2026-10-12. BCL §501(c) confirmed: for cooperative housing corporations, shares of the same class are not unequal because of variations in fees or charges payable to the corporation on sale or transfer of shares, where the fees are provided for in proprietary leases, occupancy agreements or offering plans and liquidation rights, maintenance and assessments, and voting rights meet the stated conditions. Removed the claim that bylaws or a board resolution alone can hold the flip tax (statute names proprietary leases, occupancy agreements and offering plans). Softened "most common arrangement" (no official source) to "a common arrangement". Example math re-computed by hand ($20,000 / $60,000 / $10,000 / $5,000; $13,000 at $650,000). Description shortened to 160 chars. IRS Pub 523 confirmed: amount realized is sale price minus selling expenses (commissions, advertising, legal fees listed); a co-op apartment can be a main home; $250,000/$500,000 exclusion. Pub 523 does not name flip taxes, so the guide tells readers to confirm treatment with a tax preparer. All flip tax rates in examples are hypothetical; no typical rate is claimed. That sellers most often bear the flip tax is described as market custom, not law; the guide says the documents and contract control.
Sources
- NY Business Corporation Law §501: authorized shares (subdivision c, cooperative housing fees) · New York State Senate (accessed October 12, 2026)
- Publication 523, Selling Your Home · IRS (accessed October 12, 2026)
General information, not legal, tax or financial advice. Rules change; confirm with the agency or a professional before you act.