Capital Gains Tax and Purchase Tax 2026

Capital gains tax (mas shevach) is paid by the seller on the real gain from the sale of the property, while purchase tax (mas rechisha) is paid by the buyer on the value of the property purchased. An individual pays capital gains tax of up to 25%, and a sole residential property is exempt up to a sale value of NIS 5,008,000. Purchase tax on a sole residential property starts at 0% up to NIS 1,978,745, while on an additional property it is 8% from the first shekel. Each party must file a report within 30 days of the transaction.

Send us your transaction details and we will calculate the expected tax before signing.

• You are selling a property, and you or your spouse hold an interest in another property — for example, one received through inheritance.

• The sale price of the property is close to or exceeds the exemption ceiling of NIS 5,008,000.

• You purchased a new property before selling the old one and need to know the deadline for selling in order to pay purchase tax at the sole-property rate.

• You are selling a property acquired before January 1, 2014 that is not exempt, and you want to calculate the exempt portion under the linear calculation method.

• You are transferring a property to a child or another family member without consideration.

• You invested in renovations or an addition and want to know what may be deducted.

The law imposes two separate taxes: capital gains tax paid by the seller and purchase tax paid by the buyer, each with its own rates, exemptions, and deductions.

Purchase Tax Brackets for a Sole Residential Property

The brackets are frozen from January 16, 2025 through January 15, 2028 (Real Estate Taxation Directive 1/2026):

• Up to NIS 1,978,745: 0%.

• Over NIS 1,978,745 and up to NIS 2,347,040: 3.5%.

• Over NIS 2,347,040 and up to NIS 6,055,070: 5%.

• Over NIS 6,055,070 and up to NIS 20,183,565: 8%.

• Over NIS 20,183,565: 10%.

These brackets are reserved for an individual who is an Israeli resident and for whom this is a sole residential property. On an additional property, the rate is 8% on the value up to NIS 6,055,070 and 10% on the remainder, under a temporary provision valid through December 31, 2026. Due to the Knesset elections, Section 38 of Basic Law: The Knesset is expected to extend this provision for up to three months from the convening of the new Knesset. What will apply thereafter depends on future legislation, so the applicable rate should be verified as of the date of signing.

Example: A sole residential property at NIS 2,500,000. On the first NIS 1,978,745 there is no tax; on NIS 368,295 the rate is 3.5% (NIS 12,890); and on NIS 152,960 the rate is 5% (NIS 7,648). Total: approximately NIS 20,538. The same property as an additional property: 8% of the full value — NIS 200,000.

Capital Gains Tax Rates

• Individual: up to 25% on the real gain (Section 48A(b)(1)). Company: at the corporate tax rate (Section 48A(a)).

• Property acquired before January 1, 2012: The gain accrued up to November 7, 2001 is taxed at the highest rate under Section 121 of the Income Tax Ordinance, unless the Assessing Officer permitted a lower rate. The gain from November 7, 2001 through December 31, 2011 is taxed at up to 20%, and the remainder at up to 25% (Section 48A(b1)).

• A qualifying residential property acquired before January 1, 2014 that is not exempt: The real gain accrued up to January 1, 2014 is exempt in proportion to the relevant period, and the remainder is taxed at up to 25% (enhanced linear calculation, Section 48A(b2)).

• Surtax: 3% on taxable income exceeding NIS 721,560 per year, plus an additional 2% on income from capital sources above the same threshold (Section 121B of the Ordinance). Gain from the sale of a residential property is included in the calculation only when the sale value exceeds NIS 5,385,285.

Sole Residential Property Exemption

A qualifying residential property is exempt from capital gains tax when it is the seller's only residential property in Israel and the Area, it has been owned for at least 18 months from the date it became a residential property, and the seller has not sold another property under this exemption in the preceding 18 months (Section 49B(2)). The exemption applies up to a sale value of NIS 5,008,000 for the years 2025–2027, and the proportionate share above the ceiling is subject to tax (Section 49A(a1)). A foreign resident is entitled to the exemption only upon presenting a certificate from the tax authorities in the country of residence confirming that he or she does not own a property there (Section 49A(a)).

An additional property does not disqualify the exemption if it was purchased as a replacement for the property being sold within the 24 months preceding the sale, or if your share in it does not exceed one-third — or one-half in the case of a property received by inheritance (Section 49C).

Inheritance and Gifts

• A property received by inheritance is exempt when the seller is the spouse, descendant, or spouse of a descendant of the deceased, the deceased owned only one residential property, and the deceased would have been entitled to an exemption had he or she sold it during his or her lifetime (Section 49B(5)).

• A transfer without consideration from an individual to a relative is exempt from capital gains tax (Section 62).

What Is Deducted from the Gain

• Improvement expenses, such as additions or renovations that enhance the property's value. Routine maintenance expenses are not deductible (Section 39).

• Attorney's fees, appraiser and surveyor fees, and brokerage commissions — generally up to 2%.

• Interest on a loan taken to acquire or improve the property: only the real interest component, and only if it was not already deducted for income tax purposes (Section 39A).

1. You send us the draft contract, a land registry extract (Tabu), and a list of all properties owned by you and your spouse, including partial interests in properties.

2. We verify exemption eligibility and calculate the capital gains tax — with and without the linear calculation — as well as the purchase tax at the applicable bracket. The result is an estimated amount for each party.

3. We collect receipts for improvement expenses, attorney's fees, and brokerage commissions so they can be included in the declaration.

4. We file the declarations within 30 days of the transaction. The Assessing Officer issues a tax assessment notice within 20 days, and the tax is payable within 60 days of the date of sale.

5. If the Assessing Officer issues a best-judgment assessment, we file an objection within 30 days. The subsequent stages are described on the Real Estate Tax Attorney.

When the seller is a registered dealer or a company, the question of VAT also arises. Two rulings in VAT appeals before the District Court:

I.P.F.: Tax Appeal 10304-07-14 (January 16, 2017)

A real estate company acquired the majority of rights in a building containing residential apartments and leased commercial units, and sold them approximately three years later. The VAT director assessed tax on the sale of the apartments as well. The court held that at the time of purchase the company was not entitled to deduct the input tax attributable to the residential apartments, and therefore their sale was exempt under Section 31(4) of the VAT Law. Adv. Shlomi Vaknin represented the company. The I.P.F. ruling.

Navok and Glazer: Tax Appeal 447-09-14 (May 5, 2016)

The sellers were registered as dealers and had leased a property in Tel Aviv for years to a small number of tenants, without deducting input tax. The court held that registration as a dealer does not transform passive leasing into a business, and therefore the sale of the property was not a transaction subject to VAT. Adv. Shlomi Vaknin represented the sellers. The Navok and Glazer ruling.

When the sale of a property by a registered dealer is subject to VAT, and which exemptions apply, is explained on the VAT in Real Estate Transactions and Urban Renewal.

The calculations, declarations, and objections are led by Adv. Ariel Epstein, a partner at the firm who heads the real estate taxation practice. He completed his internship at the Legal Bureau of the Customs and VAT Division at the Israel Tax Authority headquarters, and studied real estate entrepreneurship in a program run by Ono Academic College and the Ministry of Construction and Housing. When the seller is a registered dealer and a VAT issue arises, Adv. and CPA Shlomi Vaknin.