Real Estate Taxation: Everything You Need to Know About Taxes, Exemptions and Benefits

Real estate taxation is a central issue when purchasing or selling property. Therefore, before entering into a transaction, it is important to research the taxes involved and prepare for the process as thoroughly as possible. Effective tax planning will help you maximise the potential of the property and avoid particularly high expenses down the line.

So what taxes apply to a real estate transaction? What are the differences between them? How is the cost of each tax calculated? And in which cases can you receive an exemption or pay a reduced tax?

Table of Contents:

• What taxes exist and who does each tax apply to?
• Purchase tax
• Capital gains tax (Mas Shevach)
• Reliefs, benefits and exemptions — who is eligible and under what conditions?

What taxes exist and who does each tax apply to?

Buying or selling a residential apartment is frequently a complex undertaking involving a considerable number of legal and bureaucratic aspects, including specific tax payments unique to the real estate world — whether purchase tax or capital gains tax.

While purchase tax is imposed on the buyer of the property according to the property's value and additional criteria, capital gains tax is imposed on the seller and relates to the profit derived from the difference between the purchase price of the property and its sale price.

Purchase tax

As noted, purchase tax is paid by the buyer of the property, with the tax amount varying from case to case and depending on a number of parameters — including the property's value, the buyer's personal details, and the number of real estate properties in their possession. For this purpose, the state has established specific tax brackets designed to create a correspondence between the required tax amount and the property's value: the more expensive the property, the higher the tax payment, and vice versa.

For a first and only apartment, there are five purchase tax brackets as detailed in the following table.

Purchase tax brackets for a sole apartment — as of 2026

• First bracket: on the portion of value up to 1,978,745 NIS — 0% (full tax exemption).
• Second bracket: on the portion of value between 1,978,745 NIS and 2,347,040 NIS — 3% tax.
• Third bracket: on the portion of value between 2,347,040 NIS and 6,055,070 NIS — 5% tax.
• Fourth bracket: on the portion of value between 6,055,070 NIS and 20,183,565 NIS — 8% tax.
• Fifth bracket: on the portion of value above 20,183,565 NIS — 10% tax.

As can be seen, the purchase tax amount at each bracket applies to the difference between one sum and the next, and does not apply to the full value of the property.

For an additional investment apartment — whether a second, third, or more — the purchase tax is significantly higher and applies from the first shekel, as seen in the following table:

Purchase tax brackets for an additional apartment (second and above) — as of 2026

• First bracket: on the portion of value up to 6,055,070 NIS — 8% tax.
• Second bracket: on the portion of value above 6,055,070 NIS — 10% tax.

At this point it is important to distinguish between purchasing a residential apartment and purchasing land or commercial property, as these properties do not have tax brackets and the tax rate stands at 6% of the full amount. Although in cases of land intended for the construction of a sole apartment, it is sometimes possible to receive a benefit based on sole apartment criteria, provided the buyer obtains a building permit within 24 months of purchasing the land.

It should also be taken into account that tax brackets may be updated from year to year, so it is important to periodically check the data and rely on the relevant tax bracket for each purchase.

Alongside this, it is important to know that there are many cases that entitle buyers to an exemption or reduction in purchase tax, even if they do not meet the conditions detailed above, as we will explain further on.

Capital gains tax (Mas Shevach)

Capital gains tax is intended for the taxation of real estate profits and relates to the real profit between the sale value of the property and the original purchase amount. In order to calculate the precise sum, certain expenses invested by the property owner over the years for the maintenance and improvement of the property may be deducted from the profit, as well as certain payments made to professionals — including brokerage fees, renovation costs, fees paid to a specialist real estate attorney, commissions, and so on. Capital gains tax is also linked to the index, with the tax rate standing at 25% of the real capital gain. However, in certain cases where the property was purchased before 2014, a linear capital gains tax applies, which allows the seller to pay a lower tax under certain conditions.

Reliefs, benefits and exemptions — who is eligible and under what conditions?

As already noted, there are quite a few cases in which it is possible to pay a reduced tax or even receive a full exemption from purchase tax or capital gains tax. These options can increase the long-term yield of the property and lead to a significant reduction in costs. Below are several key benefits:

Exemption from purchase tax when buying a first / sole apartment

As noted, a person purchasing a first / sole residential apartment up to the value of 1.97 million NIS is entitled to a full exemption from purchase tax and benefits from lower tax brackets for a more expensive apartment. Furthermore, it is important to emphasise that this benefit also applies to people who hold up to approximately one third of an additional apartment, or to those who additionally hold a maximum of 50% of an apartment received as inheritance.

In addition, a person who has purchased an additional apartment beyond their existing first apartment may also be entitled to the benefit of paying purchase tax according to the sole apartment tax brackets, provided they commit to selling the first apartment no later than 18 months from the date of purchasing the second apartment — what is known as housing improvement.

Exemption from capital gains tax in the case of housing improvement

Following from the previous section, a buyer of a replacement apartment who has not yet sold their first apartment may be considered a "sole apartment" owner for the purposes of purchase tax brackets, and may also benefit from the sole apartment presumption for capital gains tax exemption under section 49b(2) — provided they sell their old apartment within the period stipulated by law. For purchases made between 1.6.2023 and 31.5.2025 the period was 18 months, and for purchases made from 1.6.2025 onwards the period is 24 months.

Exemption from capital gains tax on a sole apartment

People who hold a sole apartment and wish to sell it are entitled to a capital gains tax exemption, provided they held the apartment for at least 18 months prior to the sale. However, the extent of the exemption may change periodically, so it is important to check the data before the sale.

Exemption from capital gains tax and a benefit in purchase tax payment when a property is transferred as a gift between family members

When an apartment is transferred without consideration within the family, the recipient of the property benefits from a significant tax reduction and is required to pay only one third of the purchase tax cost. In addition, in such cases there is also an exemption from capital gains tax — provided the recipient commits not to sell the property for 4 years from the moment of receiving it if it was used as a residence, or for 2 years if the property was used for another purpose.

Exemption from purchase tax upon receiving a property through inheritance

Upon receiving a property by virtue of inheritance itself, there is generally no tax event under the Real Estate Taxation Law, since inheritance is not considered a "sale," and therefore purchase tax does not apply to the act of receiving the inheritance. The initial division of an estate among heirs is also not considered a sale, as long as no monetary consideration or its equivalent is provided from outside the estate assets; if such consideration is provided, a tax liability may arise in respect of that portion.

Regarding the future sale of the apartment, the capital gains tax exemption applies to the sale of a qualifying residential apartment received as inheritance, and only when three cumulative conditions are met:

1. The seller is the spouse of the deceased, or a descendant of the deceased, or the spouse of a descendant of the deceased.
2. Before their death, the deceased owned only one residential apartment.
3. Had the deceased been alive and selling the apartment, they would have been entitled to a capital gains tax exemption.

Benefits and exemptions from capital gains tax and purchase tax in cases of TAMA 38 and urban renewal

In many cases, transactions of this type entitle buyers and sellers to significant benefits and exemptions in relation to taxation. However, before signing the transaction it is important to thoroughly examine the tax conditions and consult with a knowledgeable attorney.

Additional exemptions and reliefs in purchase tax payment

In addition to the benefits mentioned above, there are further cases in which a benefit or full exemption from purchase tax may be received under certain conditions — including for people with disabilities, the blind, victims of terrorist acts, new immigrants, or when minors are purchasing a first apartment.

Bottom line:

It is important to remember that there are many legislative changes in this field, so the level of taxation may change over the years. For this reason, it is important to seek professional legal advice and assess the viability of the transaction in advance, taking into account the conditions set out in the law and the specific details of the buyer/seller. Professional advice from an attorney specialising in real estate taxation will help you accurately assess the exemptions and reliefs available to you, better understand the taxation process, and carry out the purchase/sale procedure with ease and without unnecessary concerns.

The information in this article is general information only and does not constitute legal advice, a legal opinion, or a substitute for professional guidance. Before making any decisions or taking any steps, it is recommended to consult a qualified real estate attorney for an individual examination of the case and personalised advice.