Afik HanahalCapital gains tax on real estate (Mas Shevach)
In short
Selling at a profit? The state taxes the profit, not the price. There is an important exemption for someone selling their only home, but on land, plots and additional apartments you pay.
The professional explanation
The tax is set by the Real Estate Taxation Law (Appreciation and Purchase), 1963. Gain = sale value minus indexed purchase value minus recognised expenses: legal and brokerage fees, betterment levy, renovations, fees and documented improvement costs.
The individual rate on the real gain is 25%; for assets bought before 7 November 2001 a linear calculation applies with higher historical rates on part of the period. Residential apartments enjoy a "beneficial linear calculation" for the period up to 2014.
Exemption for a single qualifying residence: subject to conditions (held at least 18 months, residency, no other apartment), up to a value ceiling updated annually. Land has no such exemption.
Example from the field
An heir who sold a Kfar Saba plot bought by their parents decades earlier owed capital gains tax under the linear calculation. Proper tax planning (spreading the gain over several years, deducting expenses) reduced the tax significantly.
Why it matters in a deal
- Selling a plot or land has no residence exemption - plan ahead.
- Keep receipts: every recognised expense reduces the gain.
- The declaration to the tax authority is due within 30 days of the deal.