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What Is the Typical NYC Co-op Flip Tax?

The typical NYC co-op flip tax is 1% to 3% of the purchase price, with 2% being the most common figure. Not all co-op buildings have flip taxes in NYC.

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What Is a Real Estate Flip Tax in NYC?

A real estate flip tax in NYC is a private transfer tax levied by the individual co-op or condo buildings on sellers. The specific flip tax varies by building, and not all co-ops charge sellers a flip tax.

While condo buildings do not typically have a flip tax, it’s not unheard of for a condo to charge sellers a small flip tax or to ask buyers to make an initial capital contribution when purchasing. A buyer capital contribution is typically a few months’ worths of common charges, and this is designed to help maintain and building a condo’s reserve fund.

In addition to any private transfer tax levied by a building, all sellers in NYC are required to pay the NYC & NYS Transfer Taxes when selling. The combined transfer taxes for NYC & NYS are 1.4% for sales of $500k or less and 1.825% for sales above $500k.

Assuming a 2% flip tax, the combined NYC & NYS Transfer Taxes and flip taxes are 3.4% for sales of $500k or less and 3.825% for sales above $500k.

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Do Condo Buildings Have a Flip Tax in NYC?

Sometimes. It’s extremely rare to encounter a condo building which charges sellers a flip tax. With that said, some condos vote to implement flip taxes if they’re encountering high operating costs or they have insufficient reserves to pay for critical capital improvement projects for the building.

It’s more common for a condo to charge buyers an initial capital contribution than for a condo to charge sellers a flip tax. Almost all new development condo buildings (or condo conversions) will charge sellers a capital contribution of a few months’ worths of common charges in order to establish the building’s initial reserve fund.

If you’re buying into a larger condo new development, you may also be asked to make a contribution towards the apartment for the live-in super. The cost of this unit is divided amongst all purchasers.

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Do All Co-ops Have Flip Taxes in NYC?

No. If a co-op has a flip tax, it’s typically documented in the purchase application, co-op proprietary lease and/or the bylaws.

If a co-op does not have a flip tax, it’s possible for one to be implemented at a later date through an owner (shareholder) vote. Flip tax votes are highly contentious, as they usually pit longstanding owners who have no intention of selling against newer purchasers who bought into the co-op under the premise that there was no flip tax.

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How to Calculate a Co-op Flip Tax in NYC

Co-op flip taxes can be calculated based on a percentage of sale price, percentage of profits, a per-share amount or a flat-fee flip tax.

Example 1 (Percentage of Sale Price):

Flip Tax: 2% of Sale Price
Sale Price: $1,750,000
Flip Tax = .02 x $1.75m = $35,000

Example 2 (Percentage of Profits):

Flip Tax: 2% of Profits
Sale Price: $1,750,000
Purchase Price: $1,250,000
Profit = $1.75m – $1.25m = $500k
Flip Tax = .02 x $500k = $10,000

Example 3 (Per Share Amount):

Flip Tax: $25/share
Number of Shares: 450
Flip Tax = $11,250

Pro Tip: Each individual co-op apartment has a certain number of shares assigned to it. A co-op’s monthly maintenance bill is apportioned amongst all apartment owners based on how many shares owned by each apartment. The number of shares allocated to an individual unit varies on a building formula which generally accounts for size, floor, exposure, etc. There is no relationship or significance between the number of shares when comparing apartments in different co-ops.

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What Are the Taxes on the Sale of a Co-op in NYC?

Taxes payable on the sale of a co-op include: NYC & NYS Transfer Taxes, a co-op flip tax as well as capital gains taxes.

NYC & NYS Transfer Taxes are 1.4% for sale prices of $500k or less and 1.825% for sales over $500k. The flip tax amount varies by co-op, however 1% to 3% is a good rule of thumb.

The amount of your capital gains tax bill depends on how long you’ve owned the home when you used it as your primary residence as well as your cost basis (purchase price plus any capital improvements).

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Disclosure: Hauseit and its affiliates do not provide tax, legal, financial or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, financial or accounting advice. You should consult your own tax, legal, financial and accounting advisors before engaging in any transaction. The services marketed on Hauseit.com are provided by licensed real estate brokers and other third party professional service providers. Hauseit LLC is not a licensed real estate broker nor a member of any multiple listing service (MLS).

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