Israeli homeowners aged 60 and over can borrow 40% to 50% of their home’s value through a reverse mortgage (mashkanta hafucha) with no monthly repayments; the loan plus compounded interest is repaid when the home is sold, vacated, or inherited. Downsizing is usually tax free: selling your only home in Israel is exempt from capital gains tax up to a sale price of ₪5,008,000, a ceiling frozen through 2027. Foreign property follows you: Israeli residents pay 25% on the real gain when selling property abroad (up to 30% with surtaxes above ₪721,560 of annual capital income) and a flat 15% on gross foreign rental income, with no deductions and no exempt band. Keeping a home abroad costs nothing to hold (no Israeli wealth tax, no arnona) but it counts as an extra apartment, pushing purchase tax on an Israeli buy to 8% from the first shekel. Olim are exempt on all foreign income and gains for 10 years; arrivals from January 1, 2026 must report it anyway.
Most retirees who come to us are property rich and cash-flow modest: a paid-off apartment in Israel, maybe a house in New Jersey or Manchester that never sold, and a pension that suddenly has to work in shekels. The wealth is real, but it is locked in walls, split across two tax systems, and every way of unlocking it carries a different price tag. This page prices all of them. It sits inside our guide to pensions, taxes, and financial planning for retirees in Israel, which in turn is part of our step-by-step guide to retiring in Israel.
Four ways to turn walls into retirement money
Every retiree property decision in Israel reduces to four levers. Here is what each one produces and what it costs in 2026:
| The move | Cash it produces | Israeli tax | The catch |
|---|---|---|---|
| Reverse mortgage | Lump sum or credit line of 40% to 50% of home value | None: loan proceeds are not income | Debt compounds; at 6% it doubles roughly every 12 years |
| Downsize in Israel | The price gap between the old home and the new one | ₪0 mas shevach up to ₪5,008,000 on an only home; purchase tax on the new one | Purchase tax plus agent fees eat roughly ₪125,000 of a typical gap |
| Sell property abroad | Your full foreign equity, converted to shekels | 25% of the real gain (30% top rate); ₪0 for olim in years 1 to 10 | The strong shekel: dollars buy 13.6% fewer shekels than at the April 2025 peak |
| Keep and rent property abroad | Monthly foreign rent | Flat 15% on gross rent, no deductions | Counts as a second apartment: 8% purchase tax from the first shekel on any Israeli buy |
Reverse mortgage (mashkanta hafucha): spend the apartment, keep the keys
A mashkanta hafucha is a loan against your home that requires no repayments while you live in it; the bank collects principal plus compounded interest when the home is sold, permanently vacated, or passes to your heirs. Eligibility starts at age 60 with a residential property registered in your name, and lenders typically require no income documentation. Loan-to-value runs 40% to 50% of appraised value, up to 60% in some products, and the younger you are at signing, the lower the percentage. Reverse mortgage options in Israel run through Bank Mizrahi-Tefahot, historically the dominant lender, plus several insurance companies that entered the market from 2021, so comparing at least two offers is now realistic. The Bank of Israel put the product under formal regulation in October 2022 and expanded the guidelines in February 2023; every lender must now hand you a standardized disclosure of the total projected repayment before you sign.
The trap is compounding. Our estimate: at an illustrative 6% annual compound rate, reverse-mortgage debt doubles roughly every 12 years (basis: the rule of 72). A ₪700,000 draw at age 67 becomes about ₪1,400,000 owed at 79 and about ₪2,800,000 at 91, so on a ₪3,000,000 apartment the residual equity left for heirs can shrink to a few hundred thousand shekels before any rise in the home’s value. Heirs can always repay the loan from other estate assets and keep the property. The typical uses we see: topping up monthly income, funding accessibility renovations, and gifting a down payment to children. If what you actually need is a purchase loan rather than income, that is a different product with its own age rules, covered in our guide to Israeli mortgages (mashkanta).
Downsizing: the tax code is on your side up to ₪5,008,000
Mas shevach is Israel’s capital gains tax on real estate, charged at 25% of the real (inflation-adjusted) gain. Downsizing usually escapes it entirely: selling your only residential apartment in Israel is fully exempt up to a sale price of ₪5,008,000, a ceiling frozen through 2027. Above the ceiling, the first ₪5,008,000 of value stays exempt and the excess is taxed at 25% on a linear basis. The conditions: it is your only apartment in Israel, you have owned it at least 18 months, and you claim one full exemption per 18-month period. You can buy the smaller replacement home before the sale or up to 24 months after it and still keep single-apartment status. There is no special age break; the exemption works the same at 45 and at 75.
The new, cheaper apartment pays purchase tax (mas rechisha) at the sole-dwelling brackets, frozen through December 31, 2026: 0% up to ₪1,978,745, then 3.5% to ₪2,347,040 and 5% to ₪6,055,070, with the full ladder in our purchase tax guide. Our estimate: a retiree selling a ₪4,200,000 family home and buying a ₪2,600,000 apartment frees about ₪1,475,000 in cash (basis: ₪0 mas shevach under the single-apartment exemption, about ₪25,500 purchase tax on the new home at the 2026 sole-dwelling brackets, and about ₪99,000 in agent fees at 2% plus 18% VAT on the sale). Downsizing also cuts arnona, maintenance, and insurance every month after. Some downsizers skip the second purchase and put the freed equity into a Diur Mugan deposit instead: deposits run ₪530,000 to ₪3,000,000 with monthly fees of ₪3,000 to ₪7,000, and the deposit, depreciation, and refund mechanics are broken down in our guide to Diur Mugan costs.
Selling property abroad: 25% on the real gain, and three ways it shrinks
Israel taxes residents on worldwide gains, so selling property abroad is an Israeli tax event: 25% of the real gain, and a 3% surtax plus a 2% capital-income surtax above ₪721,560 of annual income push the top effective rate on gains to 30%. Three mechanisms cut that bill:
- Pre-2014 linear relief. For foreign property bought before January 1, 2014, only the slice of gain accrued after that date is taxed; the earlier portion is exempt.
- Treaty credits. Israel has tax treaties with the US, UK, Canada, France, Germany, and dozens of other countries; capital gains tax paid abroad credits against the Israeli tax on the same gain, up to the Israeli amount.
- The oleh 10-year window. Olim pay zero Israeli tax on foreign property gains for 10 years from aliyah. Pre-2026 arrivals do not even report those gains; anyone who becomes an Israeli tax resident on or after January 1, 2026 keeps the tax exemption but must report all foreign income and assets from year one. The full rules are in our guide to the oleh 10-year tax exemption.
Two practical steps decide the outcome: get the property professionally valued as of the date you became an Israeli tax resident, because that valuation sets the gain Israel can tax, and use a CPA on each side of the border so the treaty credit is actually claimed. Then mind the currency: at ₪2.99 to the dollar in June 2026, the shekel’s strongest level since October 1995, your sale proceeds convert into 13.6% fewer shekels than at the April 2025 rate of ₪3.46.
Keeping property abroad: free to hold, priced into your next Israeli purchase
Keeping property abroad is fully legal, costs you no Israeli benefits, and carries no holding tax: Israel levies no wealth tax on the asset, no arnona on foreign homes, no purchase tax when you acquire abroad, and no inheritance tax when your heirs receive it. The price shows up the day you buy in Israel. A foreign home counts as an additional apartment for mas rechisha, so your Israeli purchase is taxed at 8% from the first shekel (10% above ₪6,055,070) instead of the sole-dwelling ladder, and since the August 15, 2024 reform the 0.5% oleh rate also requires the Israeli home to be your sole residence, so the foreign house forfeits that too. On the ₪2,600,000 downsizer apartment above, that turns ₪25,500 of purchase tax into ₪208,000, a ₪182,500 difference that often exceeds several years of foreign rental profit. And from 2026, new olim report all foreign assets, the house included, on every annual Israeli return, even while the income from it is exempt.
Renting out foreign property: a flat 15%, on gross, with no exemptions
Renting out foreign property means declaring worldwide rental income to the Israel Tax Authority and paying a flat 15% on gross receipts. The rate is low, but the base is brutal: the 15% track allows no deductions for mortgage interest, repairs, or management, and the exemption tracks that make Israeli rent cheap (₪5,654 per month tax free, or a flat 10% on gross) do not apply to foreign property at all. Tax paid in the country where the property sits credits against the Israeli bill, capped at the 15%. You report it on Form 1301 in the annual return due April 30, and olim inside the 10-year window pay nothing, with post-2026 arrivals reporting from day one. Our estimate: a $2,000 a month foreign rental owes the Israel Tax Authority about ₪10,800 a year (basis: $24,000 of gross rent at the ₪3.00 working exchange rate is ₪72,000, taxed at the flat 15%), before crediting foreign tax paid on the same rent. A foreign pension from the same country plays by entirely different rules, laid out in our guide to foreign pension income in Israel, and the account the rent lands in has its own compliance layer, covered in US, UK, and international accounts for Israeli residents.
Where the sale proceeds should land: Tikun 190
Tikun 190 (Amendment 190 to the Income Tax Ordinance) lets anyone aged 60 or over who already draws a pension of at least ₪5,422 a month deposit lump sums, such as the proceeds of a home sale abroad or a downsizing, into a provident fund with retiree tax treatment. Withdraw as a lump sum and you pay 15% on the nominal gain only, versus the standard 25% on real gains elsewhere; convert to an annuity and it is tax exempt under the Section 9A ceiling, at a 57.5% exemption rate in 2026 rising to 67% by 2028. How the funds themselves work is in our guide to Israeli pension funds, contributions, and payouts, and the fixation election and forms that lock in the exemption are in pension tax and retirement tax forms in Israel.
Run these five checks before you sign anything
- Reverse mortgage: demand the lender’s Bank of Israel mandated projection of total repayment at 10, 15, and 20 years, and show it to your heirs before signing.
- Downsizing: have your lawyer confirm the sale sits inside the single-apartment exemption (only home in Israel, 18 months of ownership, one exemption per 18 months) before you commit to the new purchase.
- Selling abroad: fix the property’s value as of the date you became an Israeli tax resident; that number sets your taxable gain.
- Keeping abroad: price the 8% purchase tax into any future Israeli buy, and if you arrived from 2026 onward, diary the annual foreign-asset report.
- Timing: if a foreign sale is coming, close it inside your 10-year oleh window and the entire gain is exempt from Israeli tax.
Questions retirees ask about these moves
I made aliyah in 2024. Do I pay Israeli tax when I sell my house in the US?
No. Your 10-year exemption covers foreign property gains through 2034, and as a pre-2026 arrival you do not report the sale to the Israel Tax Authority either. US tax on the sale still follows US rules.
Does the ₪5,654 monthly rental exemption cover my flat in London?
No. That exemption applies only to Israeli residential rent. Foreign rent is taxed at the flat 15% from the first shekel, with UK tax paid credited against it up to the 15%.
Can my children keep the apartment after a reverse mortgage?
Yes. Heirs repay the principal plus compounded interest from estate assets or a refinance and keep the property; otherwise it is sold and the balance after repayment goes to the estate, with no Israeli inheritance tax on what remains.
Is there a senior discount on downsizing taxes?
No. Israel has no age-based property tax break; the single-apartment exemption up to ₪5,008,000 is the relief, and it applies at every age, with up to 24 months to buy the replacement home after selling.
I own a house abroad. Do I still get the oleh purchase-tax rate in Israel?
No. Since the August 15, 2024 reform the 0.5% oleh rate requires the Israeli home to be your sole residence, and a foreign home counts as an additional apartment, so the purchase is taxed at 8% from the first shekel.
Sources
- Israel Tax Authority: mas shevach and mas rechisha thresholds, worldwide income rules, Form 1301
- Bank of Israel: reverse-mortgage regulatory framework (October 2022 measures, February 2023 guidelines)
- AACI: the 2026 reporting change for new olim under the April 2024 Income Tax Ordinance amendment
- PwC Israel tax summaries: the 15% foreign rental rate and 25% capital gains rate
- Times of Israel: the shekel below ₪3 per dollar, June 2026
Your next step
Sequence beats speed here: decide what happens to the foreign property first, because it sets the purchase tax on everything you do in Israel, then size the Israeli home, and only then route the freed cash through Tikun 190. Once the property side is set, tidy the paper side with our guide to managing your Israeli pension accounts. And if the plan involves downsizing or buying the retirement apartment itself, tell us your budget and target cities, and we will line up retiree-suitable homes and run the purchase-tax math on each one before you commit.
