Property prices in Israel have risen significantly since early 2022. While the tax exemption brackets ought to adjust to compensate for this situation, notably for owners of single home, the question remains whether the adjustment has been sufficient to cover the difference.
Tax exemption brackets for homeowners of a single apartment: When buying an apartment in Israel as an Israeli resident in Israel for tax purposes, you are entitled to various purchase tax concessions. The tax exemption bracket, however, has a ceiling and its limited adjustment does not correspond to the soaring price increases on the property market. Currently, if you wish to purchase a single property in Israel, you benefit from exemption to the flat rate of 8% acquisition tax applicable to non-residents and investors up to a ceiling currently set at only 1,805,455 Israel Shekels; beyond this, you become liable for 3.5% tax in the next bracket, rising to 5% in the top bracket.
New Immigrant concessions: An oleh hadash who purchases an apartment for his or her own residence or business, even if he or she owns another property, within the period from one year before his or he
Tax concessions on property sales: The vendor of a property in Israel will, for the most part, be subject to payment of Capital Gains Tax (Land Appreciation Tax), i.e., on the appreciation of its value and the difference between said property’s original purchase price and the sale price. However, the State of Israel also allows homeowners of a single property who are Israeli taxpayers, or those who can prove they do not own a property in their country of residence, to benefit from tax exemption up to a certain ceiling. It is important to note that this is calculated by the nominal sale price and not on the final profit. The exemption bracket is currently set at 4,603,000 Israel Shekels. If the sale price of your property exceeds this sum, you will begin paying tax on the appreciation, with all the tax implications this may have.
Rental income: As of the time of writing, there is an exemption from taxation on rental income in Israel, with this currently applicable even for those non-resident in Israel, provided that the total rental income does not exceed 5,196 Israel Shekels. Above that level, you must declare all your property income and will pay tax at a rate calculated in accordance with the pertinent accounting formulae and your marginal tax bracket.
The meteoric rise in property prices has indeed been accompanied by some adjustment of the exemption tax bracket. While these do not always compensate fully for the new price levels, the concession nonetheless offers a considerable reduction on tax liability by comparison with persons ineligible for tax breaks.
In my capacity as a Lawyer and Notary, my office is available to you in relation to any questions you may have about your assets in Israel.
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