Quick facts (15 June 2026):
- Buying: Israeli residents pay 0% purchase tax on a single home up to 1,978,745 NIS, then a rising scale. Investors and most foreign buyers pay 8% up to 6,055,070 NIS and 10% above (frozen to 31 Dec 2026).
- Selling: capital gains tax (Mas Shevach) is 25% on the real, inflation-adjusted gain. A single-home seller may be exempt if they meet the rules.
- Renting: three tracks. Tax-free up to about 5,654 NIS/month, or a flat 10% on gross rent, or your marginal rate after expenses.
- Other: betterment levy (Hetel Hashbacha) is 50% of a planning value uplift, usually paid by the seller. VAT (Ma’am) is 18%, baked into new-build prices but not normal resales.
- Foreign residents: usually lose the single-home exemptions and must report to the Israel Tax Authority.
- Warning: every threshold and rate here can change. Confirm current numbers before you sign anything.
Israeli property is taxed at three moments: when you buy (purchase tax), while you rent it out (rental income tax), and when you sell (capital gains plus a possible betterment levy). New homes also carry 18% VAT inside the price. This sub-hub explains each tax in plain English and links to the deep guides. It is part of our Israel real estate investment hub.
What taxes will I actually pay on Israeli property?
You face up to five taxes across the life of a property. Most buyers meet two or three of them. Here is the full map so you can see which ones apply to you.
| Tax | Hebrew name | When | Who pays | Headline rate |
|---|---|---|---|---|
| Purchase tax | Mas Rechisha | At purchase | Buyer | 0% to 10% (scale) |
| Rental income tax | Mas Hachnasa on rent | While renting | Owner/landlord | 0%, 10%, or marginal |
| Capital gains tax | Mas Shevach | At sale | Seller | 25% on real gain |
| Betterment levy | Hetel Hashbacha | At sale or rezoning | Seller/owner | 50% of value uplift |
| VAT | Ma’am | New-build purchase | Buyer (in price) | 18% |
How much is purchase tax (Mas Rechisha) when I buy?
Purchase tax depends on whether the home is your only home and on your residency. An Israeli resident buying a single home pays nothing on the first 1,978,745 NIS, then a rising scale. An investor (anyone buying an additional property) and most foreign residents pay a flat 8% up to 6,055,070 NIS and 10% above that, a freeze that runs to 31 December 2026 per the published bracket tables (as of 31 March 2026).
| Buyer type | 0% | Next bands | Top band |
|---|---|---|---|
| Israeli resident, only home | Up to 1,978,745 | 3.5% to 2,347,040; 5% to 6,055,070; 8% to 20,183,565 | 10% above 20,183,565 |
| Investor / additional home | None | 8% up to 6,055,070 | 10% above 6,055,070 |
| Most foreign residents | None | 8% up to 6,055,070 | 10% above 6,055,070 |
New immigrants get a special break. Under the reform that started 15 August 2024, an oleh buying a single home (in a window from one year before aliyah to seven years after) pays 0% up to 1,978,745 NIS, then just 0.5% up to 6,055,070 NIS, then the normal single-home rates. Olim who bought before the reform may elect the old regime (0.5% then 5%) if it suits them better. We explain this fully on the dedicated oleh purchase tax page in this cluster.
For the full investor bracket detail and worked sums, read our Mas Rechisha bracket guide. For the residents-versus-non-residents split, see how foreign buyers hit the 8% reality. Your starting point depends on residency, which we sort out in our buyer-status guide.
Worked example: purchase tax gap, resident vs investor (our own math, not official)
Take a 3,000,000 NIS apartment. An Israeli resident buying their only home pays 0% on the first 1,978,745, then 3.5% on the slice to 2,347,040, then 5% on the rest:
- 0% on 1,978,745 = 0 NIS
- 3.5% on (2,347,040 – 1,978,745) = 3.5% of 368,295 = 12,890 NIS
- 5% on (3,000,000 – 2,347,040) = 5% of 652,960 = 32,648 NIS
- Resident total: about 45,538 NIS
An investor pays a flat 8% on the whole 3,000,000 = 240,000 NIS. The gap is 240,000 – 45,538 = about 194,462 NIS, or roughly 6.5% of the price. That single difference is often the biggest line item separating a first-home buyer from an investor.
What is capital gains tax (Mas Shevach) when I sell?
Capital gains tax is 25% on your real gain, meaning the gain after stripping out inflation. The Israel Tax Authority indexes your purchase price to the Consumer Price Index, so you are taxed on the genuine rise in value, not the part caused by inflation, per PwC’s summary of Israeli income rules.
There is a valuable single-residence exemption: if the home is your only residence, held at least 18 months, and sells under a price cap of about 5,008,000 NIS, the gain can be exempt. Foreign residents usually lose this exemption. A linear-exemption phase-out has been discussed, but it is a proposal, not enacted law, so do not plan around it yet. We cover who qualifies on the single-home CGT exemption page in this cluster.
Read the mechanics in our capital gains tax guide. To cut the bill legally, you raise your cost basis, which we cover next.
How do cost basis and deductible costs lower my exit tax?
Your taxable gain is sale price minus your cost basis, so a bigger basis means a smaller gain and less tax. Cost basis is not just what you paid. It can include the purchase tax you paid, legal and broker fees, and capital improvements like a renovation or an added room. Keeping every receipt is the cheapest tax planning you can do.
Worked example: how a higher basis cuts the 25% bill (our own math, not official)
Say you bought for 2,000,000 NIS and sell for 2,800,000 NIS, a 800,000 NIS headline gain. Now add documented costs to the basis: 160,000 NIS purchase tax, 40,000 NIS legal and broker fees, and 150,000 NIS in a kitchen-and-bathroom renovation.
- Adjusted basis: 2,000,000 + 160,000 + 40,000 + 150,000 = 2,350,000 NIS
- Real gain (ignoring inflation indexing for simplicity): 2,800,000 – 2,350,000 = 450,000 NIS
- Tax at 25%: 112,500 NIS
Without those receipts the gain would be 800,000 NIS and the tax 200,000 NIS. The documented costs saved 87,500 NIS. Real cases also apply CPI indexing on top, which usually lowers the bill further. See the full method in our guide to cost basis and deductions on your exit tax.
What is the betterment levy (Hetel Hashbacha)?
The betterment levy is a municipal charge of 50% of the increase in your land’s value caused by a planning change, such as new building rights or rezoning. It is usually paid by the seller or owner when the gain is realized, often at sale. Urban-renewal projects may get a reduced 25% rate or an exemption to encourage redevelopment.
This levy is separate from capital gains tax and is easy to forget, yet it can be large where a city grants extra floors or density. The rules and a live legal fight over how they apply are covered in our betterment levy guide.
How is rental income taxed in Israel?
Residential rent has three tracks, and you pick the cheapest one each year. Track one is tax-free up to a monthly ceiling of about 5,654 NIS (confirmed for 2025 and reported frozen for 2026, so verify). Track two is a flat 10% on gross rent with no deductions, paid by 30 January. Track three uses your marginal income-tax rate after you subtract real expenses and depreciation, per PwC’s income-determination summary.
| Track | How it works | Best for |
|---|---|---|
| Exempt | 0% up to about 5,654 NIS/month; partial above | Small or single rentals under the ceiling |
| Flat 10% | 10% of gross rent, no expenses deducted | Higher rents with few costs |
| Marginal | Your income-tax rate after expenses and depreciation | Heavy costs, mortgages, or many units |
If your rent sits just above the exempt ceiling, the exemption tapers rather than vanishing. Full details, including the partial-exemption math, are in our rental income tax guide. To pressure-test whether a property pays after tax, use the methods in our deal-analysis guide.
Does VAT (Ma’am) apply to property?
VAT is 18% and it mainly hits new-build homes. When you buy from a developer, the 18% VAT is already inside the quoted price, so you do not pay it separately. A normal resale between private individuals is generally not VAT-able, which is one reason resale and new-build prices are not directly comparable. The 18% rate has applied since 1 January 2025 per VATupdate. We compare new-build versus resale VAT in detail on the dedicated VAT page in this cluster.
What do foreign residents need to report?
Foreign residents are taxed on their Israeli property but usually lose the resident-only breaks, so they pay the 8% to 10% purchase scale and rarely get the single-home capital gains exemption. They must still report to the Israel Tax Authority, file on rental income, and declare gains on sale. Currency swings between the shekel and your home currency add another layer, because your tax is figured in shekels even if your money is in dollars or euros. The common pitfalls are covered on the foreign-resident property traps page in this cluster.
Why do thresholds and rates keep changing?
Israeli property tax brackets are indexed and politically active, so the numbers move. The investor purchase-tax brackets are frozen only to 31 December 2026. The rental exemption ceiling is reported frozen for 2026 but that needs confirming. The capital gains linear-exemption phase-out is still just a proposal. Treat every figure on this page as a snapshot dated 15 June 2026, and always check the live number before you act.
Action checklist before you buy or sell
- Confirm your status: only-home, investor, oleh, or foreign resident. This sets your purchase-tax scale.
- Run today’s purchase tax on the exact price using current brackets, not last year’s.
- Keep every receipt: purchase tax, legal and broker fees, and renovation invoices all raise your future cost basis.
- Pick a rental track each year and compare exempt, 10%, and marginal before filing.
- Check for a betterment levy if any planning rights or rezoning touched your property.
- If selling, test the single-residence capital gains exemption (only home, 18 months, under the price cap).
- Get written confirmation of current rates from a licensed adviser before signing.
If you want a clear read on which taxes apply to your specific purchase or sale, talk to the Semerenko Group team and we will map it out with you.
By the Semerenko Group research desk. Reviewed by the Semerenko Group brokerage team. Last updated 15 June 2026. This page is general information, not tax or legal advice. Tax, legal, and finance rules change often: confirm current figures and your own position with a licensed Israeli tax lawyer or mortgage advisor before acting.
Sources
- Kol Zchut: purchase tax (Mas Rechisha) brackets
- PwC: Israel individual income determination (capital gains, rental tracks)
- VATupdate: Israel VAT to 18% from January 2025
- Calcalist: oleh purchase tax reform
Common questions
How much purchase tax does a foreign buyer pay in Israel in 2026?
Most foreign residents pay 8% on the price up to 6,055,070 NIS and 10% on any amount above that, the same scale as Israeli investors buying an additional home. This bracket is frozen to 31 December 2026. Foreign buyers do not get the 0% first band that resident single-home buyers receive.
What is the capital gains tax rate when selling Israeli property?
Capital gains tax (Mas Shevach) is 25% on the real gain after inflation indexing. An only-home seller who held the property at least 18 months and sells under a price cap of about 5,008,000 NIS may be exempt. Foreign residents usually lose this single-residence exemption.
Is rental income taxed in Israel?
Yes, with three tracks you choose between each year: tax-free up to about 5,654 NIS per month, a flat 10% on gross rent with no deductions, or your marginal income-tax rate after deducting real expenses and depreciation. The exempt ceiling is confirmed for 2025 and reported frozen for 2026.
What is the betterment levy (Hetel Hashbacha)?
It is a municipal charge of 50% of the increase in your land value caused by a planning change such as added building rights or rezoning. It is usually paid by the seller or owner when the gain is realized. Urban-renewal projects may qualify for a reduced 25% rate or an exemption.
Does VAT apply when buying property in Israel?
VAT (Ma’am) is 18% and mainly applies to new homes bought from a developer, where it is already inside the quoted price. A normal resale between private individuals is generally not VAT-able. The 18% rate has applied since 1 January 2025.
In-depth guides in this section
- Israel Purchase Tax (Mas Rechisha) 2026 Brackets
- Foreign Buyer Purchase Tax in Israel: 8% Reality
- Capital Gains Tax (Mas Shevach) on Israeli Property
- Betterment Levy (Hetel Hashbacha) in Israel
- Israel Rental Income Tax: Exempt, 10% or Marginal
- VAT on Israeli Property: New Build vs Resale
- Cut Your Israel Exit Tax: Cost Basis and Deductions
