Selling Your Only Apartment in Israel: Capital Gains Tax Exemption and How the Tax Is Calculated

Usually yes: a person selling their only residential apartment in Israel may be exempt from capital gains tax on real estate (mas shevach, often translated as land appreciation tax), but the exemption is not automatic. It depends on cumulative conditions — residency, holding period, a value ceiling and ownership of other apartments — and when one of them is not met, tax is calculated on the real gain, sometimes on only part of it.

Even without a full exemption there is usually something to examine: deductible expenses, the beneficial linear calculation, the timing of the sale and the correct track in the tax filing. For a case-specific review before signing, contact our real estate taxation and capital gains tax attorney, and see the wider picture in tax law and real estate law.

The short answer

Israeli law exempts the sale of a "qualifying residential apartment" that is the seller's only apartment, provided the seller is an Israeli resident, has held it for at least 18 months from the date it became a residential apartment, and has not sold another apartment under the same exemption in the 18 months before the sale. The exemption is capped by a sale-value ceiling — approximately NIS 5,008,000 as of 2026 — and above it tax is charged only on the proportional share of the gain.

Tax savings start with a review, not an assumption. A share in another apartment, a short holding period or a recently used exemption can change the result by hundreds of thousands of shekels.

Who qualifies: the cumulative conditions

• The seller is an Israeli resident. A foreign resident may qualify only by proving, with the certificate the Israel Tax Authority requires, that they own no residential apartment in their country of residence.
• This is the seller's only apartment in Israel on the date of sale. Spouses are generally assessed together for this purpose, not separately.
• The apartment meets the definition of a qualifying residential apartment: it was used mainly for living, not as an office, business or storage space.
• The seller has held the apartment for at least 18 months from the date it became a residential apartment.
• The seller has not sold another apartment under the single-apartment exemption in the 18 months before this sale.
• The sale value does not exceed the exemption ceiling. If it does, the exemption covers only part of the gain.

All of the conditions are examined together and against documents: the Land Registry (Tabu) extract, contracts, inheritance orders, gift agreements and previous filings with the Israel Tax Authority. "This is my only apartment" is a starting point, not a conclusion.

When the apartment still counts as your only one

The law and its regulations recognise situations in which another right does not cancel single-apartment status: for example, a small share in another apartment that does not exceed the rate set in the regulations, an apartment received by inheritance under certain conditions, or an apartment let under protected tenancy since many years ago. Each exception has its own conditions, so the ownership details must be checked, not only the percentage held.

Someone who bought a replacement apartment before selling the existing one does not necessarily lose the exemption: the law preserves single-apartment status if the old apartment is sold within 18 months of buying the new one. Missing that deadline can turn the seller into the owner of two apartments for tax purposes. When the new apartment is bought from a developer and is still under construction, check in advance when the period begins and how the payment schedule and delivery date fit the sale date of the old apartment.

How capital gains tax is actually calculated

Mas shevach is charged on the gain — the difference between the sale value and the purchase value, after deductible expenses. The calculation has several stages:

• Establish the purchase date and purchase value. In an ordinary purchase this is the contract price. In an inheritance or a gift between relatives, the purchase date and value of the donor or deceased usually carry over.
• Deduct allowable expenses (detailed below) and subtract depreciation where the apartment was rented out and depreciation applies.
• Separate the real gain from the inflationary amount — the part of the price increase that reflects indexation to the consumer price index. The inflationary amount is largely exempt, and tax is charged on the real gain.
• For a property bought after November 2001, the real gain is generally taxed at 25%. For earlier purchases, the gain is apportioned between periods and the rates vary accordingly.

When the apartment meets the exemption conditions but the sale value exceeds the ceiling, the taxable gain is the proportional share of the gain that corresponds to the part of the sale value above the ceiling.

A hypothetical, simplified example, not based on any real case and excluding indexation and expenses: an only apartment bought for NIS 2,400,000 is sold for NIS 6,000,000. The gain is NIS 3,600,000. The part above the ceiling is NIS 992,000, about 16.5% of the sale value, so only about NIS 595,000 of the gain is taxable, and 25% tax on it is about NIS 149,000. A real calculation adds indexation, deductible expenses and a check for a more favourable track.

When there is no entitlement to the single-apartment exemption — for example, for an owner of several apartments — the beneficial linear calculation may apply: the part of the gain attributed to the period up to the end of 2013 may be exempt, and the part after it is taxable. This track has its own conditions and limits and does not suit every sale.

Inheritance, gifts and new-build apartments: what changes

An inherited apartment may be sold exempt even if the heir owns another apartment, where the deceased would have been entitled to the exemption had they sold it themselves and the heir is their spouse or descendant. The calculation relies on the deceased's purchase date and purchase value. A detailed guide is available in how capital gains tax is calculated on an inherited apartment.

Transferring an apartment as a gift to a relative can be exempt from capital gains tax at the time of transfer, but the recipient steps into the donor's shoes for the purchase date and purchase value. The law also sets a cooling-off period during which the recipient cannot sell the apartment under the single-apartment exemption, and its length depends, among other things, on whether the recipient lives in the apartment. A gift made shortly before a sale to "clear" the parents' ownership can therefore delay the exemption rather than help. Transfers between spouses, for example under a divorce agreement, follow separate rules.

When selling an apartment bought from a developer, the purchase date is generally the date the contract was signed, but the 18-month holding period runs from the date the apartment became a residential apartment, not from signing. A seller who sells shortly after delivery may find they are not yet entitled to the exemption. When buying from a developer while owning an existing apartment, coordinate the delivery and sale dates in advance — see also legal support when buying a new apartment from a developer.

Deductions and reliefs worth knowing

• Purchase tax paid when the apartment was bought.
• Attorney fees, brokerage fees and appraiser fees, on both the purchase and the sale.
• Improvement expenses such as an extension, an added room or a substantial renovation, as opposed to routine maintenance. If receipts are missing, see what to do without renovation receipts.
• Betterment levy paid to the local planning committee, which is a charge separate from capital gains tax. See betterment levy before selling a property.
• Spreading the real gain over several tax years, under the conditions set by law. This mainly suits sellers whose income in the spreading years is low.

Expenses are recognised only if they are documented and attributable to the apartment being sold. Collecting invoices, agreements and payment confirmations before the apartment is listed avoids disputes with the assessing officer later.

How to reduce the tax before you sell

• Check every right the seller and their spouse hold in other apartments, including shares received by inheritance or as a gift.
• Confirm that 18 months have passed since the apartment became residential and since the previous exemption, and time the sale accordingly.
• If there is a replacement apartment, set payment and delivery dates in the contract that allow the old apartment to be sold in time.
• If the price is close to or above the ceiling, examine whether part of the consideration is attributable to unused building rights, which the exemption does not cover.
• Gather all deductible expenses before filing.
• If you own several apartments, decide which one to sell under the exemption and which under the linear calculation before selling the first.

After signing, a declaration of the sale is filed online with the Israel Tax Authority within 30 days, on the appropriate forms, explicitly claiming the exemption or calculation track. An exemption that is not claimed is not granted automatically. If the Tax Authority issues an assessment higher than the self-assessment, an objection (hasaga) can be filed, usually within 30 days, and the decision on the objection can be appealed to the appeals committee.

When to seek advice, and how the office can help

The right time is before listing the apartment, and certainly before signing a sale contract or a contract for a replacement apartment. The office of Attorney Karin Amsalem supports sellers at these stages:

• Checking eligibility for the exemption against the documents: Land Registry extract, ownership history, inheritances, gifts and previous exemptions.
• A case-specific capital gains tax calculation, including indexation, deductible expenses and a comparison of calculation tracks.
• Preparing and filing the declarations and forms with the Israel Tax Authority on time.
• Representation before the real estate taxation office at the assessment stage, filing objections, and appeals to the appeals committee where there is a dispute.

Sellers in northern Israel can arrange a meeting through our real estate tax services in the north page. Bring an up-to-date Land Registry extract, the purchase contract, receipts for investments in the apartment, and any inheritance order or gift agreement. This article is general information and does not replace a review of your own circumstances.