Capital Gains Tax & Purchase Tax

In the average real estate purchase or sale transaction in Israel, people tend to focus on the property price but forget the "real cost" – taxes. Capital gains tax (betterment tax, on the seller) and purchase tax (on the buyer) are often the largest expense in a transaction, potentially reaching hundreds of thousands of shekels. Inattention to small details, failure to report improvement expenses, or choosing the wrong exemption route can lead to entirely unnecessary tax payments. Don't give the state a larger share than the law requires you to give.

The Real Estate Taxation Law is a complex system of rules and exemptions that change frequently:

1. Capital Gains Tax (Mas Shevach): This is a tax on the real (inflation-adjusted) profit generated from the sale of a property (currently 25%). The law allows reducing the tax through the "beneficial linear calculation" (for properties purchased before 2014), deduction of expenses (renovations, mortgage interest, attorney fees, and brokerage), and use of the "single property" exemption (subject to strict conditions).

2. Purchase Tax: A graduated tax imposed on the buyer. The tax amount depends dramatically on the purchaser's status: whether it is a "single property" (low tax brackets/partial exemption) or an "investment property" (tax currently starting at 8% from the first shekel).

Our firm performs precise tax simulations before the contract is signed, to prevent surprises. Our expertise lies in finding "money left on the table": reconstructing historical expenses to reduce the taxable gain, utilizing the "tax spreading" mechanism (reducing tax for those with low income or retirees), and proper planning of the family unit to reduce purchase tax. We ensure that the assessment you receive is the lowest legally possible.