Sell a Tel Aviv flat you bought in 2010 for NIS 1,500,000 at NIS 3,500,000, and the headline gain looks like NIS 2,000,000. The actual mas shevach bill in that case comes to about NIS 220,000, roughly 11 percent of that gain, not the 25 percent everyone braces for. That gap is the whole story of this tax.
Israel taxes a residential sale at 25 percent, but only on the real gain, the part left after inflation. The Tax Authority restates your old purchase price and your costs by the consumer price index (the madad) from the month you paid to the month you sell, and that inflationary slice is exempt. You then strip out real costs (purchase tax, agent and lawyer fees, renovations, any betterment levy paid). Hold a flat from before 1 January 2014 and the linear calculation exempts the gain built up before that date and taxes only the post-2014 share.
One more thing a hurried seller needs: you report the sale within 30 days of signing, and you cannot register the buyer at the Land Registry without a tax clearance. Many resident sellers skip all of this entirely under the single-apartment exemption, covered further down.
One sale, calculated line by line
Here is a single worked case. The numbers are illustrative, chosen to show every rule that matters. Treat it as a template, not your filing.
The facts: You bought a Tel Aviv flat in January 2010 for NIS 1,500,000. You are selling in January 2026 for NIS 3,500,000. Assume the price index rose 40 percent over your holding period (this is an assumption for the worked example, not a fact-bank figure; you pull your real index factor from the Tax Authority madad tables). Along the way you paid purchase tax of NIS 75,000, an agent and lawyer about NIS 90,000 on the sale, and a NIS 60,000 kitchen-and-bath renovation. There is no betterment levy here.
| Line | What it is | Amount (NIS) |
|---|---|---|
| 1 | Sale price (shovi mecher) | 3,500,000 |
| 2 | Original purchase price (shovi rechisha) | 1,500,000 |
| 3 | Indexed purchase price (line 2 raised by the 40 percent madad factor) | 2,100,000 |
| 4 | Deductible costs, then indexed (purchase tax, fees, renovation) | 225,000 |
| 5 | Nominal gain (line 1 minus line 2) | 2,000,000 |
| 6 | Real gain before the 2014 split (line 1 minus line 3 minus line 4) | 1,175,000 |
| 7 | Inflationary component, not taxed (line 5 minus line 6) | 825,000 |
| 8 | Real gain after the linear split (taxed portion, see below) | 881,250 |
| 9 | Mas shevach due (25 percent of line 8) | 220,313 |
Now the rule behind each line.
Line 1 and Line 2: the two prices the tax office starts from
Mas shevach measures the gap between what you sell for and what you originally paid, not what the flat is worth on paper. Line 1 is the contract price. Line 2 is the price on your original purchase agreement. Keep that old contract: it is the anchor for the entire calculation, and the Tax Authority will not take your word for the number.
Line 3: why your purchase price grows before anyone taxes you
This is the single most misunderstood step. The NIS 1,500,000 you paid in 2010 was worth more in real terms than NIS 1,500,000 in 2026, because prices in general rose. So the law lets you restate your old purchase price in today’s money using the consumer price index from the month you paid to the month you sell. In the example a 40 percent index rise turns NIS 1,500,000 into NIS 2,100,000. That extra NIS 600,000 is gain you do not pay tax on. You get your real index factor from the Israel Tax Authority madad tables, not from a guess.
Line 4: the costs that come straight off the top
You subtract real money you spent buying, improving, and selling the property. The deductible list includes purchase tax (mas rechisha), agent commission, lawyer and legal fees on both the purchase and the sale, genuine improvement and renovation work, and any betterment levy you paid. These costs are also indexed to the CPI from the day you paid them to the day you sell. Routine repairs and your own time do not count; capital improvements that add lasting value do. Keep every receipt, because undocumented costs are costs you cannot deduct.
Line 5 versus Line 6: nominal gain is a trap, real gain is the base
The nominal gain (NIS 2,000,000) is the number sellers fear. It is also the wrong number. After indexing the purchase price and removing real costs, the real gain in this case is NIS 1,175,000. The difference, NIS 825,000, is the inflationary component on line 7, and it is exempt. My worked figure: in this example inflation indexing and costs strip out about 41 percent of the headline gain before any rate is applied (825,000 inflationary plus 225,000 costs, against the 2,000,000 nominal gain). The 25 percent rate only ever bites the real gain that survives.
Line 8: the 2014 linear split for anything you held that long
If you owned the flat before 1 January 2014, Amendment 76 splits the real gain by calendar days. The share that built up before 1 January 2014 is exempt; the share from 1 January 2014 onward is taxed at 25 percent. The split is by time held, not by when the value actually rose, so a longer pre-2014 holding means a bigger exempt slice. In the example you held the flat from January 2010 to January 2026, that is 16 years, of which 4 years fell before 2014. So one quarter of the holding period is exempt.
My worked figure: 4 exempt years out of 16 total is 25 percent of the holding period. Apply that to the NIS 1,175,000 real gain and NIS 293,750 is exempt under the linear rule, leaving NIS 881,250 taxable (line 8). The linear calculation also applies to non-residents, who otherwise cannot use the resident single-home exemption.
Line 9: the rate, and what it actually costs you here
Individuals pay 25 percent on the surviving real gain. Here that is NIS 220,313. My worked figure: that is about 11 percent of the NIS 2,000,000 headline gain and about 6.3 percent of the NIS 3,500,000 sale price. The lesson is plain: the scary 25 percent applies to a base that indexing, costs, and the linear split have already shrunk by more than half.
The shortcut most resident sellers actually use
Many resident sellers never reach the math above, because a sole apartment can sell fully exempt up to a ceiling of NIS 5,008,000 (frozen 2025 to 2027), once every 18 months, if you are an Israeli resident who has owned it about 18 months. That single-apartment exemption is a separate path with its own conditions, and it is covered in detail on the single-apartment tax exemption page. If you qualify and the price is under the ceiling, the line-by-line gain calc does not apply at all. The calc on this page is what you fall back to when you do not qualify, when you sell above the ceiling, or when you are a non-resident leaning on the linear calculation.
Do this now
- Find your original purchase contract and read the price off it. That is line 2.
- Pull the CPI (madad) index factor for your purchase month and your sale month from the Israel Tax Authority tables. That sets line 3.
- Gather receipts for purchase tax, agent and lawyer fees, and capital renovations. No receipt, no deduction.
- If you owned the flat before 1 January 2014, count your holding days before and after that date for the linear split.
- Check first whether the single-apartment exemption wipes the tax out entirely before you bother with the gain calc.
- Report the sale to the Tax Authority within 30 days of signing, and budget for the tax clearance you need to register the buyer at the Land Registry.
Words you needed above
- Mas shevach: the national land appreciation tax on the gain between your purchase and sale, collected by the Israel Tax Authority.
- Real gain: the nominal gain minus the inflationary component and minus deductible costs. This is the only part taxed.
- Madad: the consumer price index used to restate your old purchase price and costs in today’s money.
- Linear calculation: the day-based split that exempts the gain built up before 1 January 2014 and taxes the rest at 25 percent.
Confirm before you act
Three things move this number and change often. First, your exact madad index factor: use the live Tax Authority table for your specific months, not a round 40 percent. Second, the single-apartment exemption ceiling and conditions, which can change with the annual budget law. Third, there is a draft proposal to phase out the pre-2014 linear exemption over the coming years; it is not enacted law as of mid 2026, but confirm its status before you rely on a fully exempt pre-2014 slice. A real estate tax lawyer should run your final figure before you sign.
Where this sits among your selling taxes
Mas shevach is one of several charges on a sale. A municipal betterment levy can also apply when a planning change raised your property’s value, and it is a separate calculation paid to the local committee, explained on the betterment levy page; note that a betterment levy you pay is itself a deductible cost on line 4 above. For the full picture of every tax, fee, and clearance a seller faces, see the complete guide to selling-property taxes in Israel.
Sources
- PwC, Israel individual other taxes: https://taxsummaries.pwc.com/israel/individual/other-taxes
- Givati Law, capital gains tax in Israel: https://givatilaw.co.il/understanding-capital-gains-tax-in-israel/
- Nadlan Center, land appreciation tax guide: https://www.nadlancenter.co.il/article/413
Next step: Want your own line-by-line gain figure before you list? Send us your purchase year, purchase price, and target sale price and we will sketch the real-gain math for you.
Capital gains tax is the biggest swing in most sales. Fit it into your whole result with our guide to selling property in Israel.
