The Comprehensive Guide to Israeli Purchase Tax (2026)

Exemptions, Reliefs, and Strategic Tax Planning for Residential Property

Note: This article deals with the taxation of real estate intended for residential use only (according to the City Building Plan - TABA). These instructions do not apply to real estate designated for commerce, employment, industry, hotelier use, or any other planning designation. The tax liability for these designations is fundamentally different and does not benefit from the brackets detailed below.

Important Notice: This article should not be seen as legal advice or tax planning. The article reviews the subject of Purchase Tax and does not delve into all the intricacies of the law. You must consult a specialized real estate tax attorney or a tax advisor before taking any action.

Special Notice for Foreign Residents: Under Israeli tax law, non-residents are generally classified by default as "Additional Dwelling" purchasers (Investors), regardless of whether this is their first property in Israel. To qualify for the "Single Dwelling" tax brackets (starting at 0.0%), a foreign resident must provide official certification from the tax authorities in their country of residence proving they do not own a residential property there. Without such proof, the tax rate begins at 8.0% from the first shekel.

According to the Real Estate Taxation Regulations, there are several exemptions and reliefs (full or partial) in the payment of Purchase Tax in Israel.

Do you want to know how to save on Purchase Tax? How to avoid paying Purchase Tax?

Who can receive an exemption? How to avoid paying Purchase Tax on an additional apartment (investment property)? And how an appraiser can get you money back even after 4 years? This article is for you.

As of the date of writing this article, these are the Purchase Tax brackets for a Single Residential Dwelling for a purchaser who is an Israeli resident (or a foreign resident presenting a residency permit on the date of purchase):

Tier	Value Range (in ILS)	Tax Rate
Tier 1	Up to 2,023,105	0.0% (Full Exemption)
Tier 2	2,023,105.0 – 2,399,445	3.5%
Tier 3	2,399,445.0 – 3,095,305	5.0%
Tier 4	3,095,305.0 – 5,648,155	8.0%
Tier 5	Above 5,648,155	10.0%

Additional Dwelling (Investor / Foreign Resident):

• Up to 6,233,115.0 ILS: 8.0%

• Above this amount: 10.0%

The Gap Between an Investment Property and a Single Property: Numeric Demostration with a Property Valued at 2,500,000 ILS

How one property can yield a tax of 20,000.0 ILS or 200,000.0 ILS ? The answer lies in the classification of the purchaser:

• "Single Dwelling" Track (Israeli Resident): The state exempts the first two million (0.0%). The tax applies only to the remaining 500,000.0 ILS, and even there at low rates (3.5% and 5.0%). Total Tax: approximately 20,538.0 ILS.

• "Additional Dwelling" Track (Investor): The legislator canceled the exemption from the first shekel. The entire value is taxed at 8.0%. Total Tax: 200,000.0 ILS.

• "Other Right" Track (Land): A fixed tax of 6.0%. Total Tax: 150,000.0 ILS. Note: Upon meeting conditions regarding the issuance of a permit, a 1.0% refund can be obtained (this benefit, under Section 9(c1a)(1), is conditional on issuing a building permit within 24 months from the purchase date).

How is a 10x multiplier created? In a single dwelling, the state grants an "exemption" on most of the value. In a second dwelling, the legislator set a "deterrent" tax of 8.0% starting from the first shekel. In land, the tax is linear (6.0%) regardless of the number of apartments you own.

Case 1 – One-Third of an Apartment and the Property Count

The law sets thresholds below which ownership of a part of an apartment is not considered ownership of an "apartment" for the purchaser's property count.

Section 9(c1c)(4)(a) of the Real Estate Taxation Law states: For the definition of a "Single Dwelling," an additional apartment will not be taken into account if:

• The purchaser's share in it does not exceed 1/3 (one-third).

• In an apartment received via inheritance – the purchaser's share does not exceed 1/2 (one-half).

• The apartment was leased under Protected Tenancy before January 1, 1997.

Practical meaning: If you own 30.0% of an apartment (less than a third), and you are now purchasing a new apartment, the Tax Authority will treat you as a "Single Dwelling" purchaser. Therefore, you will be entitled to reduced tax brackets (including a full exemption up to the threshold of approximately 2,000,000.0 ILS).

Case 2 – Transfer Without Consideration (Gift Apartment from a Relative)

An individual receiving a residential apartment from a relative as a gift (transfer without consideration) will pay a reduced Purchase Tax at a rate of 1/3 (one-third) of the regular Purchase Tax.

“20. In the sale of a right in real estate without consideration from an individual to their relative, the Purchase Tax will be one-third of the regular Purchase Tax.”

Who is considered a relative?

1. Spouse, including one who was a spouse during the six months prior to the sale.

2. Parent.

3. Descendant.

4. Spouse of a descendant.

5. Brother and sister.

Calculation for half an apartment as a gift: If the owner transferred only part of an apartment (e.g., half), the regular Purchase Tax is calculated first according to the full (total) value of the apartment so that all brackets are activated – then divided by a third (reduced rate) and then divided by 2 because only half was transferred.

Case 3 – Gift to a Spouse Living Together

Furthermore, in a transfer without consideration of a residential apartment between spouses living together in the same apartment (and this is the apartment being gifted), there is a full exemption from Purchase Tax.

“21. Notwithstanding Regulation 20, the sale of a right in real estate in a residential apartment without consideration to a spouse living together with them in the apartment, is exempt from Purchase Tax.”

Meaning: If the spouses live in the apartment – they are entitled to a full exemption; if they do not live in it – Purchase Tax of 1/3 (one-third) of the regular tax will be paid, like any other relative.

Reservation – The Shelmi Ruling: 

In cases of spouses purchasing an apartment, the presumption of the family unit can be rebutted by proving property separation (e.g., via a prenuptial agreement and separate bank accounts), allowing one spouse to be considered a single dwelling purchaser even if the other has an apartment from before the marriage.

In Cases 2 and 3 lies the possibility of not paying full Purchase Tax on an additional apartment: One can transfer their current apartment to a relative (e.g., parents) at a reduced tax (1/3) and then purchase the new apartment under the reduced "Single Dwelling" brackets.

Note: The gift transaction must be genuine and not artificial. Pay attention to the "Family Unit" definition. If the child is a minor (under 18), registration in their name does not help for tax purposes, as the law sees parents and minor children as one purchaser.

Case 4 – Improving Dwellers / Alternative Apartment

The law provides reliefs for a seller who commits to selling their current (and only) apartment later while purchasing a new one. The new apartment will be considered an "alternative" to the existing one – and the seller is obligated to sell the existing one within a certain time.

In this method, the Tax Authority "freezes" the Purchase Tax of the new apartment. Section 9(c1a)(2)a(2) defines the relief:

A: A purchaser of a second-hand apartment can sell their existing apartment within 24.0 months from the purchase of the new one.

B: In a purchase from a developer/contractor (new), they can sell the original apartment up to 12.0 months from the day possession is actually delivered.

Note -The Melchior Ruling: 

Although the specific case of the Melchior family involved a stuck purchase group, the legal rationale applies to any purchase where the delivery date is unknown or delayed: if the construction was delayed not due to the purchaser (war, lack of workers, contractor bankruptcy), and because of the delay, the taxpayer sells their old apartment only after 6.0 or 7.0 years – the Melchior ruling should apply as long as they sold within 12.0 months of actual completion.

C – Buying Land to Build an Alternative: The Tax Authority's position (2021) is that in a situation where land was purchased to build a dwelling, the period is counted from the completion of construction (Form 4).

Case 5 – Buying an Apartment and Demolishing the Structure

In some cases, tax planning can be done where purchasing an apartment is treated as purchasing land, specifically when the buyer intends to demolish the existing structure.

• Additional Dwelling: Tiered tax of 8.0% to 10.0%.

• Land: Fixed rate of 6.0%.

  Example (10,000,000.0 ILS property): Additional dwelling tax is 878,899.0 ILS vs. Land tax of 600,000.0 ILS.

  The focus is on the subjective intent of the buyer. Note that the seller can still declare it as a "Residential Dwelling" for Appreciation Tax exemptions while the buyer reports it as "Land."

Case 6 – Relief for an Apartment in a Purchase Group Not Yet Completed

Amendment 93 (2018) allows members of a "stuck" purchase group to be considered "Improving Dwellers":

1. At the time of joining the group, it was their only apartment.

2. 4.0 years have passed and construction hasn't started, or 6.5 years have passed and possession wasn't delivered.

3. The delay was beyond the purchaser's control.

4. They must sell the rights in the group within 18.0 months of completion (Form 4).

Case 7 – Special Populations

1. Discount for the Disabled

Under Regulation 11, a disabled or blind person purchasing an apartment for their own residence is entitled to:

• Single Dwelling up to 2,500,000.0 ILS: Full exemption up to the first tier (2,023,105.0 ILS) and 0.5% on the remainder.

• Additional Dwelling or value above 2,500,000.0 ILS: A reduced rate of 0.5% from the first shekel.

  Eligibility: 75.0% permanent loss of earning capacity, 100.0% permanent medical disability, or 90.0% weighted disability.

2. Bereaved Families

Identical conditions to the disabled (Regulation 11). Includes IDF orphans up to age 40.0, widows/widowers, and bereaved parents.

3. New Immigrants (Olim) – 2026 Rules

Per Regulation 12 (Jan 2026), an "Oleh" has a benefit for a single dwelling:

• 0.0% up to 2,023,105 ILS.

• 0.5% between 2,023,105 ILS and 6,233,115.0 ILS.

• 5.0% on the part exceeding 6,233,115 ILS.

  Eligibility: Between one year prior to entry and 7 years after.

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