Real Estate Appreciation Tax 2026 – The Comprehensive and Updated Guide

Real Estate Appreciation Tax 2026 – The Comprehensive and Updated Guide

כשאתם עומדים למכור דירה או מקרקעין בירושלים או בכל מקום אחר בישראל, אחת השאלות הכואבות ביותר שעולה היא: “כמה מס שבח אצטרך לשלם?” התשובה לשאלה הזו יכולה לעשות הבדל של עשרות ואף מאות אלפי שקלים בכיס שלכם. במאמר מקיף זה, נסביר לכם כל מה שצריך לדעת על מס שבח מקרקעין בשנת 2026, כולל שיעורי המס העדכניים, פטורים זכאים, דרכים חוקיות לחיסכון במס, והכל בשפה פשוטה ומובנת.

At the Halevi Law Firm in Jerusalem, we specialize in assisting with real estate transactions and minimizing capital gains tax liability in a legal and professional manner. Recent years have brought with them significant changes in legislation, and in this article we will detail all the relevant updates for 2026.

What is real estate appreciation tax?? The basic understanding

Definition and legislative history

A tax on appreciation is a tax imposed on The profit resulting from the sale of a right in real estate or in real estate, as determined בחוק מס שבח מקרקעין (שבח ורכישה), התשכ”ג-1963. The tax is not imposed on the sale amount but on the real appreciation – that is, the difference between the sale price and the original purchase price, after deducting recognized expenses and adjusting for inflation.

The law is intended to impose a tax on The real increase in the value of the property לאורך השנים, תוך הבנה שחלק מהעלייה במחיר נובע מאינפלציה ולא מעלייה ריאלית בערך. כך קבע בית המשפט העליון בע”א 757/87 פורת נ’ מנהל מס שבח מקרקעין, שם הובהר כי “מהות מס השבח היא מיסוי הרווח הריאלי הנובע מעליית ערך הנכס, ולא המיסוי של רכיב אינפלציוני בלבד”.

Who is liable for the appreciation tax??

Capital gains tax liability applies to anyone who sells a right in real estate, including:

• Residential apartment owners – Even those who sell their only apartment above the amount specified in the Real Estate Taxation Law
• Real estate investors – Owners of apartments for rent or sale
• Companies and entrepreneurs – Business entities selling assets
• Heirs – Although there are certain exemptions in certain situations
• Gift recipients – In certain cases, as detailed below

It is important to understand thatThe sale itself creates the tax liability., גם אם הכסף טרם התקבל בפועל. כך נקבע בעמ”ש (ת”א) 1598/07 כהן נ’ מנהל מס שבח, שם נפסק כי “חבות המס נוצרת במועד חתימת החוזה או העברת הזכויות בפועל, המוקדם מביניהם”.

The institutions involved in the process

Handling a real estate transaction requires familiarity with several government bodies:

Land Registry Office (TABU)

Land Registry Office In Jerusalem, located at 34 Ben Yehuda Street, City Tower, 1st floor, is responsible for registering the transfer of rights to the property. A real estate transaction cannot be completed without the approval of the Land Registrar, and registration is usually conditional on payment of the capital gains tax or receipt of an exemption certificate.

Tax Authority – Real Estate Administration

Real Estate Appreciation Tax Administration, operating under the Tax Authority, is responsible for the assessment and collection of the tax. In Jerusalem, the main office is located at 66 Kanfei Nesharim, Jerusalem. Every seller is required to submit דו”ח מוכר Within 30 days from the date of sale or signing of the contract, in accordance with Section 73 of the Law מיסוי מקרקעין (שבח, מכירה ורכישה), התשכ”ג-1963.

Ministry of Justice

way execution And the court system, the Ministry of Justice is involved in cases of tax disputes or non-payment, as well as in enforcement proceedings on assets with debts.

Capital Gains Tax Rates 2026 – Full details

Tax rates for individuals

As of 2026, the capital gains tax rates for individuals in Israel are:

Single residential apartment (partially exempt)

Regarding Single residential apartment, the tax rate is:

• 0% For the first credit up to the full exemption ceiling
• 25% On the praise above the exemption ceiling

The ceiling for full exemption as of 2026 is an amount that is updated annually according to the index. In 2025, the ceiling was approximately5,446,830 ₪ (Updated in accordance with the Law on Adjusting the Exemption Amount to the Index), and in 2026 is expected to be higher in accordance with the increase in the index.

An apartment that is not a unit or income-producing property

For an additional apartment or income-producing property, the tax rates are Ranked:

• 25% On the appreciation up to 6,467,280 NIS (amount updated according to the index)
• 30% על השבח שמעל הסכום הנ”ל

בבג”ץ 4885/03 עמותת צרכנים קואופרטיבית נ’ שר האוצר, נקבע כי “שיעורי המס המדורגים נועדו ליצור פרוגרסיביות וצדק חברתי, כאשר מי שמרווח יותר משלם שיעור גבוה יותר על החלק העודף”.

Special cases and unique tax rates

Purchase by inheritance

When it comes toinheritance, The determining price is the value of the property at the time of inheritance, and not the original purchase price of the testator. This is in accordance with Section 48A of the Law. For example, if a father purchased an apartment in 1995 for 300,000 NIS, and at the time of his death in 2023 its value was 2,500,000 NIS, and his son sold it in 2026 for 3,000,000 NIS – the taxable gain is only 500,000 ₪ (The difference between 2026 and 2023).

Transfer between spouses

Moving an apartment between spouses (married or publicly known) is an action Exempt from appreciation tax, in accordance with Section 62 of the Law. The exemption applies when the transfer of rights is made from one spouse to another, provided that the spouses are legally married or have been recognized as known in the public.

However, it is important to understand: when the spouse who received the property sells it in the future, the appreciation will be calculated From the original date of purchase By the first spouse. That is, the transfer between spouses postpones the tax liability but does not eliminate it.

זאת בהתאם לפסק הדין בעמ”ש (חי’) 44885-11-10 מנהל מס שבח נ’ חמאד, בו נקבע כי “העברה בין בני זוג אינה יוצרת ‘איפוס’ של מחיר הרכישה, אלא המשכיות במחיר המקורי”.

Selling to a relative

Selling to a relative requires special attention. The Tax Authority may examine whether the sale was made inFair market price Or is it an artificial transaction designed to reduce taxes?.

סעיף 69(5) לחוק מקנה למנהל מס שבח סמכות לקבוע כי שווי העסקה הוא שווי השוק, גם אם הצדדים הסכימו על מחיר נמוך יותר. בעמ”ש (י-ם) 1069/00 יעקב נ’ מנהל מס שבח, נקבע כי “במכירה לבן משפחה, על המוכר להוכיח כי המחיר המוצהר הוא אכן מחיר השוק האמיתי, שאם לא כן רשאי המנהל לקבוע שווי על בסיס שמאות”.

Who is considered a relative for legal purposes?:

• spouse (married or publicly known)
• Parent, parents, parent (Grandparents)
• Descendant and descendants of a descendant (child, grandchild, great-grandchild)
• Brother and sister and their spouses
• Spouse of any of the above relatives

Gift of a right in real estate

Gift of real estate It is a complex subject in taxation. According to Section 63(a) of the Law, The giver (the one who gives the gift) is the one who is liable for the gift tax., not the recipient. That is, if a parent gives an apartment as a gift to their child, the parent will pay the capital gains tax based on the value of the property at the time of the gift, just as if he had sold it.

Important exception: Gift between spouses Completely exempt, as stated above.

Also, ininheritance (Different from a gift) – There is no capital gains tax liability on the heir at the time of receiving the inheritance. The liability only arises when the heir sells the property in the future.

בעמ”ש (ת”א) 35591-06-13 מנהל מס שבח נ’ לוי נקבע: “מתנה במקרקעין דינה כמכירה לצורכי חוק מס שבח, והנותן נושא בחבות המס. תכלית ההוראה היא למנוע התחמקות ממס באמצעות העברות מתנה במחיר נמוך או ללא תמורה”.

Disabled – Special tax benefits

People with disabilities זכאים להטבות משמעותיות במס שבח. על פי תקנות מס שבח (שיעור המס על שבח ממכירת זכות במקרקעין על ידי נכה), התשס”ד-2004, נכה המחזיק בDisability certificate from the National Insurance Institute With a disability rate of 90% or higher, you are entitled toDiscount of 25% At the tax rate.

i.e:

• Instead of 25% – will pay 18.75%
• Instead of 30% – will pay 22.5%

Eligibility is conditional on the disability certificate being valid at the time of sale. In addition, disabled people are sometimes entitled to an increased exemption ceiling in certain cases.

Capital gains tax calculation – The Practical Guide and Linear Calculation

The basic formula

The calculation of the capital gains tax is done in the following steps:

Determining the nominal appreciation

Deduction of recognized expenses

Recognized expenses include:

• Purchase payments: מס רכישה, שכ”ט עורך דין, דמי תיווך, אגרות רישום
• Property improvement expenses: Construction, renovation and expansion expenses (with references)
• Selling expenses: שכ”ט עורך דין, דמי תיווך ששילם המוכר, עמלת שמאי
• Purchase tax paid In the past

Index compliance

The purchase price and expenses are adjusted to the consumer price index according to the formula:

Calculating the real appreciation

Tax calculation

After we have determined the real appreciation, we will subtract the relevant exemption (if any) and multiply by the tax rate:

example: Single apartment in Jerusalem

The data:

• Buying an apartment in Jerusalem: January 2015 At the price 1,500,000 ₪
• Purchase tax paid: 55,000 ₪
• הוצאות רכישה (עו”ד, תיווך): 35,000 ₪
• Renovation in March 2016: 80,000 ₪ (with references)
• sale: February 2026 At the price 3,500,000 ₪
• הוצאות מכירה (עו”ד, תיווך): 70,000 ₪
• January 2015 Index: 100 points (For example purposes)
• February 2026 Index: 130 points
• This is aboutSingle apartment The seller's

Step-by-step calculation:

1. Adjusting the purchase price to the index:
   • 1,500,000 × (130/100) = 1,950,000 ₪
2. Adjusting purchase expenses to the index:
   • Purchase tax: 55,000 × (130/100) = 71,500 ₪
   • Other purchase expenses: 35,000 × (130/100) = 45,500 ₪
   • Renovation (March 2016 index, say 102): 80,000 × (130/102) = 101,961 ₪
3. Calculating the real appreciation:
   • Selling price: 3,500,000 ₪
   • Less: Updated purchase price: 1,950,000 ₪
   • Less: Updated purchase tax: 71,500 ₪
   • Less: Updated purchase expenses: 45,500 ₪
   • Less: Updated renovation: 101,961 ₪
   • Less: Selling expenses: 70,000 ₪
   • Real appreciation = 1,261,039 ₪
4. Exemption deduction (single apartment):
   • Let's assume the exemption ceiling for 2026 is 5,600,000 ₪ (Updated)
   • Because the value of the apartment (3,500,000 NIS) is lower than the exemption ceiling, The entire award is tax-exempt!

result: Appreciation tax = 0 ₪

example: Second apartment (investment apartment)

The data:

• Buying an apartment for investment: September 2018 At the price 1,200,000 ₪
• Purchase tax: 82,000 ₪
• Purchase expenses: 30,000 ₪
• sale: March 2026 At the price 2,100,000 ₪
• Selling expenses: 50,000 ₪
• September 2018 Index: 110 points
• March 2026 Index: 132 points
• It is not a single apartment. – The seller owns another apartment

Calculation:

1. Index compliance:
   • Purchase price: 1,200,000 × (132/110) = 1,440,000 ₪
   • Purchase tax: 82,000 × (132/110) = 98,400 ₪
   • Purchase expenses: 30,000 × (132/110) = 36,000 ₪
2. Calculating real appreciation:
   • 2,100,000 – 1,440,000 – 98,400 – 36,000 – 50,000 = 475,600 ₪
3. Tax calculation (non-single apartment):
   • Since the appreciation is less than 6,467,280 NIS, the entire appreciation is subject to 25%
   • Appreciation tax = 475,600 × 25% = 118,900 ₪

result: Appreciation tax = 118,900 ₪

example: Income-producing property with high appreciation

The data:

• Purchasing a commercial property: 2012 on-2,000,000 ₪
• sale: 2026 on-10,000,000 ₪
• After all deductions and adjustments to the index: Real appreciation = 6,000,000 ₪

Calculation:

The praise is divided into two parts:

1. Up to 6,467,280 ₪: 6,000,000 ₪ – Taxed at 25%
   • Tax: 6,000,000 × 25% = 1,500,000 ₪

result: Appreciation tax = 1,500,000 ₪

If the reward were 7,000,000 NIS:

1. First part (up to the ceiling): 6,467,280 × 25% = 1,616,820 ₪
2. Excess portion: (7,000,000 – 6,467,280) × 30% = 159,816 ₪
3. סה”כ: 1,776,636 ₪

Capital Gains Tax Exemptions and Reliefs – Your rights

The exemption for a single residential apartment

This is the most important and significant exemption for the ordinary citizen. According to Section 49B of the Law, a familiar person Single residential apartment Entitled to full or partial exemption from appreciation tax.

Conditions for eligibility for exemption:

1. Residential apartment – The property must be a residential apartment (not an office, shop or warehouse)
2. Single apartment – The seller does not own another apartment.
3. The relevant period – The apartment was owned by him for at least 18 months out of the 24 months preceding the sale, or at least 4 years out of the 6 years preceding the sale

Scope of exemption:

Full exemption – If the value of the apartment does not exceed the exemption ceiling (approximately 5.6 million NIS for 2026).

Partial exemption – If the value of the apartment is higher, the exemption is calculated as follows:

Exemption = (exemption ceiling / apartment value) × appreciation

example:

• Apartment value: 7,000,000 ₪
• Exemption ceiling: 5,600,000 ₪
• Realistic praise: 2,000,000 ₪

Calculating the exemption:

• Exemption = (5,600,000 / 7,000,000) × 2,000,000 = 1,600,000 ₪
• Taxable portion: 2,000,000 – 1,600,000 = 400,000 ₪
• Appreciation tax: 400,000 × 25% = 100,000 ₪

בע”א 8080/16 שאול נ’ מנהל מס שבח נקבע כי “הפטור על דירת מגורים יחידה נועד להגן על אזרח פשוט המוכר את מקום מגוריו היחיד, ויש לפרש את התנאים לזכאות באופן תכליתי ומיטיב עם הנישום”.

מהי “דירה יחידה“?

השאלה מתי דירה נחשבת ל”יחידה” מורכבת במיוחד במקרים הבאים:

Joint ownership with a spouse: If you are married and jointly own one apartment – this is considered a single apartment for both of you.

Partially owned apartment: If you own 50% from one apartment and 50% from another apartment – You don't have a single apartment., and you will not be eligible for an exemption.

Apartment in the process of being purchased: בעמ”ש (חי’) 51680-03-18 מנהל מס שבח נ’ שפירא נקבע כי “דירה שלגביה נחתם הסכם מכר אך טרם נרשמה בטאבו נחשבת כדירה לצורך שלילת הפטור על ‘דירה יחידה'”.

Exemption for an apartment purchased by inheritance

Apartment inheritance Entitles to two significant exemptions:

1. There is no tax liability at the time of the inheritance itself. – The heir does not pay capital gains tax for simply receiving the inherited property.
2. Updated purchase price – When the heir sells the property, the purchase price for the purpose of calculating the appreciation is the value of the property at the time of inheritance and not the testator's original purchase price.

example:

• Father purchased an apartment in 1990 in200,000 ₪
• Death in 2020, value of the apartment: 2,500,000 ₪
• The son sold in 2026 at3,200,000 ₪
• The praise due: only 700,000 ₪ (3,200,000 – 2,500,000), after adjustments

In addition, if the apartment purchased by inheritance is Single apartment of the heir, he is entitled to the full exemption for a single residential apartment, as detailed above.

Additional exemptions

Exemption for protected tenants (protected tenants)

Protected tenant The person who purchases the apartment in which he lives from the owner is entitled to a full exemption from purchase tax according to the Tenant Protection Law. The exemption applies Only on the first sale by the protected tenant.

Exemption for new immigrants

newcomer or Returning resident Are entitled to a full exemption from capital gains tax on the sale of a single residential apartment for a period of 4 years from the date of immigrating to Israel, provided that the apartment was purchased within 7 years from the date of immigrating. This is in accordance with Section 49B(2) of the Law.

Exemption for those aged 60 and over – Under certain conditions

People of my age 60 and over Those eligible for full exemption from health insurance premiums (due to low income) are entitled toAddition to exemption At a rate of 25% from the normal exemption ceiling.

Legal tax planning – How to save tax legitimately

Advancement of expenses or deferral of income

One of the legal and accepted strategies is Timing of the transaction.

Sale rejection: If you are close to exceeding the exemption ceiling, it is sometimes worth postponing the sale until next year when the ceiling increases according to the index.

Expenditure acceleration: If you intend to renovate the apartment before selling it, it is better to do so Before signing the contract, so that the expenses will be recognized in full. Renovations made after the signing of the sales agreement may not be recognized.

Splitting a transaction between spouses

In the case where a property is held by one spouse, but has exceeded the exemption ceiling, sometimes It is worth transferring some of the rights to the other spouse. (in the tax-exempt transfer) before the sale. This way, everyone sells their share and benefits from their full exemption.

example:

• Apartment owned solely by the husband, value: 8,000,000 ₪
• Expected praise: 3,000,000 ₪
• Normally: Part of the appreciation will exceed the exemption ceiling and part of it will be taxable.

solution:

• Transfer of 50% of rights to a wife (tax exempt on the transfer)
• Everyone knows 50% and enjoys their own exemption
• Significant tax savings

Important to note: אסטרטגיה זו חייבת להיעשות בייעוץ משפטי מקצועי ובהתאם להוראות החוק, ויש לוודא שאין בכך עסקה מלאכותית. בע”א 2017/17 מנהל מס שבח נ’ כהן נקבע כי “פיצול זכויות לגיטימי אינו נחשב להתחמקות ממס, ובלבד שנעשה לצרכים אמיתיים ולא רק למטרת הפחתת מס”.

Use of building rights

If you have Building rights about the property (for example, the possibility of expanding or building an additional floor), Exercise of rights before the sale Can increase the value of the property while at the same time creating recognized expenses that reduce the appreciation.

example:

• דירת 80 מ”ר עם זכויות הרחבה של 20 מ”ר
• במקום למכור את הדירה כמות שהיא, מרחיבים אותה ל-100 מ”ר
• Expansion cost: 200,000 NIS
• The apartment is sold at a higher price, but the expansion expenses are recognized in full.
• Sometimes, the net gain will be lower

Payment deferral – Sale of bonds or installments

If you are selling a property In installments or in exchange for Designated bonds, you can request it from the Tax Authority Deferral of tax payment In accordance with the receipt of payments. This is according to Section 8 of the law. This allows for better liquidity and prevents the need to borrow money to pay the tax.

Professional advice – When is it essential??

Essential legal and tax advice In the following cases:

• High-value assets (over 3 million NIS)
• Selling to a relative
• Properties that have been improved over the years (construction, expansion)
• Complex transactions (asset exchange, partnerships)
• Inheritances with multiple heirs
• Any situation where there is uncertainty about the tax implications

At the Halevi Law Firm in Jerusalem, We provide comprehensive advice that combines legal and tax aspects, while examining all legal options for reducing the tax burden.

The procedure for reporting and paying capital gains tax

הגשת דו”ח מוכר – Deadlines and procedure

Reporting obligation: Every property seller must submit דו”ח מוכר (Form 7) within 30 days From a date The earliest Understands:

• Date of signing the sales contract
• Date of receipt of possession by the buyer
• Date of transfer of rights at the Land Registry Office

The report is made to the relevant assessment office according to the location of the property. In Jerusalem, The report is submitted to the Jerusalem Value Added Tax Office, 66 Kanfei Nesharim St., Jerusalem.

אי הגשת הדו”ח במועד עלולה לגרור Fines וlinkage of the tax, as stipulated in section 73 of the law.

Tax payment

לאחר הגשת הדו”ח, רשות המסים שולחת assessment With details of the tax calculation. It is possible:

1. To receive the assessment and pay the tax on time
2. Submit a complaint Within 30 days of receiving the assessment, if you believe there is an error in the calculation

Payment methods:

• By cash or credit payment at the Tax Authority offices
• By bank transfer to the account number indicated on the assessment.
• Through the Tax Authority's online citizen service system

Important to know: Land Registry Office You will not complete. The transfer of ownership in the land registry without confirmation from the Tax Authority that the tax has been paid or that the transaction is tax-exempt.

Advances and self-assessments

Sometimes, to speed up the sales process, sellers pay Tax advance On the basis of Self-esteem of the tax liability, even before receiving the official assessment. This allows for faster payment confirmation and completion of the registration of rights.

If it turns out that the advance was Too high – The Tax Authority will refund the excess (usually with linkage differences). If the advance was Too low – A demand will be sent for payment of the remaining tax.

Disputes and appeals – How to deal with the tax authority

Filing an objection to an assessment

If you disagree with the assessment you received, it is your right Submit a complaint Within 30 days of receiving the assessment. Upon receipt, please specify:

• Reasons for disagreement
• What do you think is the correct calculation?
• Supporting references (invoices, certificates, documents)

The Appeals Committee at the Value Added Tax Administration will review the appeal and issue a decision. In many cases, it is possible to reach a decision. To arrange or To compromise At this point.

Appeal to the court

If the achievement is rejected, it can be Appeal to court Within 30 days of receiving the denial of possession, the appeal is filed with the district court in the area where the property is located. In Jerusalem – Jerusalem District Court.

In court, additional evidence, a real estate appraiser's opinion, and a full hearing on all aspects of the appraisal can be presented.

Important to note: Sometimes it is worth considering Compromise agreement Even before reaching an appeal, to save time, legal costs, and uncertainty.

Common mistakes to avoid

1. No reporting at all – אי הגשת דו”ח מוכר היא עבירה החייבת בקנסות כבדים
2. Partial or incorrect reporting – Reporting a lower than actual price, omitting known expenses
3. Lack of documentation – Failure to keep invoices, receipts and proof of payments
4. Ignoring the times – חריגה מהמועדים להגשת דו”חות, השגות וערעורים
5. Attempting aggressive tax planning – Artificial transactions that may be considered tax evasion

בעמ”ש (ת”א) 15539-04-19 מנהל מס שבח נ’ אברהם נקבע כי “מוכר שדיווח על מחיר נמוך ממחיר האמיתי נושא בחבות לתשלום המס בתוספת קנס, ובמקרים חמורים אף צפוי להליכים פליליים”.

Complex questions and situations – Responding to special cases 

Selling part of a property or joint rights

Selling part of an apartment (e.g., 50% from ownership) subject to capital gains tax Relatively. That is, the praise is calculated on Property rule, and the tax is paid on the proportional part sold.

example:

• Apartment jointly owned by 4 brothers (25% each)
• One of the brothers sells his share.
• Total appreciation on the apartment: 1,000,000 NIS
• The reward for the sold part: 250,000 NIS
• The seller will pay tax on 250,000 NIS

question: האם כל אח נחשב כבעל “דירה יחידה“?

The answer depends on whether a particular brother has another residential apartment that he owns entirely. Ownership in 25% of one apartment is less significant than full ownership, and the accepted interpretation is that such partial ownership does not negate the entitlement to an exemption on another apartment that he owns entirely.

However, this is a complex issue that requires Concrete testing of the circumstances.

Divorce and division of property

בDivorce, division of property between former spouses receives Exemption from appreciation tax Under certain conditions, according to Section 62 of the Law. The exemption applies when the distribution is made according to:

• Divorce agreement
• Family Court Judgment
• Arbitrator's decision

And everything Within 9 months From the date of the final divorce, or within a later period with the approval of the Appreciation Tax Administrator.

important: The exemption applies to Transfer of rights between spouses, but does not apply to the sale of the property to a third party. When one of the spouses sells the property he received in the division of property, the appreciation will be considered From the original date of purchase By the couple.

בעמ”ש (חי’) 44324-09-16 כהן נ’ מנהל מס שבח נקבע כי “פטור מס השבח בגירושין נועד לאפשר חלוקה צודקת של הרכוש המשותף מבלי שמס יהווה מכשול, אך הוא אינו מבטל את חבות המס הפוטנציאלית במכירה עתידית”.

Apartment exchange

barter (Exchanging an apartment for an apartment) is not exempt from capital gains tax. Each party is considered As a seller of his property andAs a buyer of the other party's property, and is liable accordingly.

but: אם עסקת החליפין עומדת בתנאים מסוימים של “שילוב” כמשמעותו בפקודת מס הכנסה, ייתכנו הקלות מס מסוימות. זוהי סוגיה מורכבת הדורשת ייעוץ מקצועי.

Rented apartment – Does it matter??

If the apartment Rented During the ownership period, this May affect On the eligibility for exemption for a single residential apartment. According to the ruling, if the apartment was used as a residential apartment for the seller (even if it was rented out for part of the time), he is still eligible for exemption.

However, if the apartment was rented The whole period ומעולם לא שימשה למגורי המוכר – ייתכן שרשות המסים תטען שאין מדובר ב”דירת מגורים” אלא ב”נכס מניב”, ותשלול את הפטור.

בע”א 2144/00 לוי נ’ מנהל מס שבח נקבע: “הגדרת ‘דירת מגורים’ לצורך הפטור מתייחסת לאופי השימוש בפועל בידי המוכר, ולא רק לייעוד המתוכנן של הנכס”.

Sale before the previous purchase was recorded

Common situation: You bought an apartment, you signed a contract., but You have not yet completed the registration with the Land Registry., and in the meantime you have found a buyer who is willing to pay you more.

In terms of appreciation tax, The right is created upon signing the contract., גם ללא רישום. לכן, אתם נחשבים כ”בעלים” מבחינת מס השבח, והמכירה תהיה חייבת במס (אלא אם כן תקבלו פטור).

Pay attention: במצב כזה יש להיזהר מ”מכירה כפולה” (מכירה לשני קונים שונים), שהיא עבירה פלילית.

Change of purpose – Residential to commercial or vice versa

Change of purpose of property (e.g., residential to office, or vice versa) is considered by law As a sale For capital gains tax purposes, even if the property remains your property!

מדובר ב**”מכירה רעיונית”** שעליה תחול חבות במס, ויש להגיש דו”ח ולשלם מס על השבח שנצבר עד לאותו מועד.

הדבר נכון גם בכיוון ההפוך: אם נכס מסחרי הפך למגורים – זו “מכירה” לצורכי מס.

Frequently Asked Questions

Is it possible to pay capital gains tax in installments??

yes, In some cases, if the seller receives the consideration In installments Over time, he can ask the tax authorities Deferral of tax payment Respectively. That is, pay the tax according to the receipt of payments.

This right stems from Section 8 of the law, and is intended to prevent a situation in which the seller has to pay tax on money that he has not yet received.

condition: Must be submitted Special request For payment deferral, and is subject to approval by the Director of Value Added Tax.

What happens if the selling price is lower than the purchase price??

if You lost money. In a transaction (you sold for less than you purchased, even after adjusting for the index), No capital gains tax liability About this deal.

but: The loss Cannot be offset against other profits or other income, but against future appreciation from the sale of other assets, and only under certain conditions.

i.e: If you sold an apartment at a loss, and in a few years you sell another apartment at a profit – you can offset the previous loss from the new profit, thereby reducing the tax.

Does a relative who purchases an apartment pay reduced purchase tax??

Yes and no. Purchase tax relief for a relative only applies in certain cases:

A parent for his child: A parent who purchases an apartment in the name of their minor child is entitled to a certain amount of relief in purchase tax, as if the child had purchased it themselves (lower tax brackets).

Brothers: There is no special relief. Each sibling pays regular purchase tax.

Spouses: If a couple purchases together – the tax is calculated based on the proportional shares, but there is no special relief beyond the normal eligibility.

Is it possible to claim undocumented renovation expenses??

short: Very difficult, but not impossible.

The Tax Authority requires References For each expense. If there is no invoice or receipt, the expense will not be recognized.

exception: If you can prove the expense in other ways (bank transfers, before and after photos, affidavits from contractors), the Tax Authority Made of Recognize some of the expenses.

acting, Highly recommended Keep all documentation from the first day of purchasing the property.

Is transferring an apartment from a company to an owner tax-exempt??

Not necessarily. The transfer of an asset from a company to its shareholder is considered As a sale For capital gains tax purposes, the company may be liable for tax.

exception: In some cases of Company dissolution or Division of property, an exemption or relief may be obtained, subject to the conditions specified in the Income Tax Ordinance.

This is a very complex issue that requires the advice of an accountant and a lawyer specializing in corporate taxation.

Can a buyer demand that the seller deduct the tax from the price??

Legally, it's a matter of negotiation..

The capital gains tax is imposed on the seller, and the buyer is not a party to this matter at all. However, in practice, sometimes a buyer and seller agree that the seller will deduct from the price an amount corresponding to the expected tax. This is especially common when the buyer can find similar properties at similar prices, and the tax makes the transaction less attractive.

זהו נושא למו”מ בין הצדדים, ואין חובה חוקית על המוכר להסכים.

How to deal with a misplaced mole?

Steps:

1. Examine the mole carefully. – Sometimes there are simple calculation errors
2. Collect references – Invoices, purchase documents, proof of payments
3. Submit a written objection – Within 30 days, with all documents
4. Consider legal advice. – In complex cases or high amounts
5. Be prepared to compromise. – Sometimes a settlement is better than a prolonged conflict

Is the sale of an apartment purchased decades ago eligible for a full exemption??

dependent. The exemption for a single residential apartment Not dependent In seniority of ownership. Even if the apartment was purchased 40 years ago, if it meets the conditions (single apartment, residential), it is eligible for exemption. Based on the value at the time of sale, not based on seniority.

However, the exemption is limited to the ceiling set by law, so if the value of the apartment exceeds the ceiling, part of the appreciation will be taxable.

Summary and recommendations – Advice for selling a property 

Real estate appreciation tax is a complex and economically significant issue that every property seller in Israel should be familiar with. A thorough understanding of the law, exemptions, and legal ways to plan for tax can save you tens or even hundreds of thousands of shekels.

Main recommendations:

1. Plan ahead. – Don’t wait until the last minute. Consult with experts. before Signing the sales contract
2. Keep full documentation – Every invoice, receipt and document related to the purchase and renovation of the property
3. Consult professionals – Especially in complex transactions or high amounts
4. Submit reports on time – Do not exceed the deadlines set by law.
5. Check eligibility for exemptions – Sometimes there are exemptions you didn't know about
6. אל תנסו “להתחכם על המערכת” – Legal tax planning is one thing, tax evasion is another.
7. Be prepared for questions. – רשות המסים תבדוק את הדו”ח, היו מוכנים להסביר ולהצדיק

How the Halevi Law Firm can help?

At the Halevi Law Firm in Jerusalem, we offer comprehensive and professional support throughout the entire real estate sale process, including:

• Advance tax advice and planning – Examining all legal options for reducing the tax burden
• Legal support in the sales transaction – Drafting contracts, reviewing documents, handling defects
• Preparation of reports and certificates – סיוע בהגשת דו”ח מוכר והשגות על שומות
• Representation before the Tax Authority – In the proceedings of obtaining and appealing
• Coordination with the Land Registry Office – Completing the registration procedures and closing the deal
• Consulting on complex transactions – Inheritances, divorces, partnerships, companies

📌 משרד עו”ד הלוי, ירושלים – Specializes in real estate, capital gains tax consulting, representation with the Tax Authority and appraisers, personal and professional service at every stage of the transaction.  Contact us.

Closing words

Real estate appreciation tax is an integral part of selling a property in Israel, but there's no reason it should become a nightmare. With Proper preparation, Professional advice, andUnderstanding your rights and obligations, you can navigate the process successfully and minimize your tax liability legally and ethically.

Remember: Information is power., and investing the time in understanding the subject today will save you a lot of money tomorrow.

Legal Statement: This article provides general information only and does not constitute legal or tax advice. Each case is unique and requires individual examination. It is recommended to consult with a lawyer and accountant before making decisions.

Last update: February 2026
Main sources: חוק מס שבח מקרקעין (שבח ורכישה), התשכ”ג-1963, פסקי דין של בית המשפט העליון והמחוזי, תקנות רשות המסים, אתר רשות המסים הממשלתי.