Purchase Tax
Purchase tax is paid by the buyer upon acquiring real estate. The amount depends on the property price and the buyer's status:
First apartment (partial exemption): Up to ₪1,978,745 — 0%. ₪1,978,745 to ₪2,347,040 — 3.5%. ₪2,347,040 to ₪6,055,070 — 5%. Above ₪6,055,070 — 10%.
Additional apartment (investor): Up to ₪5,525,070 — 8%. Above this threshold — 10%.
Note: these are the 2024 brackets. They are updated annually in line with the index. Use our Purchase Tax Calculator for a precise calculation.
Capital Gains Tax (Mas Shevach)
Capital gains tax is levied on the profit made from selling a property. The tax rate is 25% on the real profit. Exemptions apply under certain conditions: a sole dwelling held for at least 18 months and sold no more than once every 18 months. The exemption does not apply to a second investment property.
Important: When calculating capital gains tax, you can deduct renovation costs, lawyer's fees, purchase tax paid, and other costs — which reduces the taxable profit.
Rental Income Taxation
In Israel there are three rental income tax tracks:
Full exemption: Rental income up to ₪5,654 per month (2024 ceiling) is completely exempt from tax — if the property is residential and is not classified as "business income." Those earning above this ceiling may lose the entire exemption.
10% flat rate: A fixed tax of 10% on all rental income, without the ability to deduct expenses. Simple and stable — suitable for those with low expenses.
Marginal rate track: Rental income is added to other income and taxed at ordinary income tax rates (marginal tax brackets). Recognised expenses can be deducted (depreciation, mortgage interest, renovations, building fees). Suitable for those with relatively high expenses.
Taxation and Mortgage — Important!
Interest on a mortgage taken out to purchase an investment property can be deducted from income tax (only under the marginal rate track). This can significantly reduce your tax liability. Consult a tax advisor to choose the right track.