Calculating Apartment Purchase Tax: Relief, a Sole Apartment, and a Second Apartment

How the Tax Is Calculated

The purchase of a right in real estate is subject to tax under the Real Estate Taxation (Appreciation and Purchase) Law, 5723–1963. The calculation depends on the property’s value and type, the purchaser’s status, the number of apartments the purchaser owns, and the tax brackets in effect on the date of the transaction. An exemption is granted for a sole apartment up to a threshold that is updated annually, while the amount exceeding that threshold is taxed at progressive rates.

Relief for Certain Purchasers

People with permanent medical disabilities who meet the prescribed conditions are entitled to pay tax at a rate of 0.5% when purchasing an apartment for their residence; this relief may not be used more than twice in a lifetime. If spouses purchase an apartment jointly and it is intended for their shared residence, the 0.5% rate applies to the entire property, even when medical approval was granted to only one spouse. New immigrants may receive reduced tax rates when purchasing an apartment or a business during a period beginning one year before immigration and ending seven years afterward—once for an apartment and once for a business.

Purchasing a New Apartment Before Selling the Old One

As long as the previous apartment has not been sold, the Tax Authority generally regards the new purchase as the purchase of a second apartment, subject to a higher tax rate from the first shekel. A person upgrading their home may declare an intention to sell the previous apartment within 18 months of purchasing the new apartment, or within one year of receiving the keys if the apartment was purchased from a contractor. If the sale is completed on time, tax is imposed on the new apartment as a sole apartment; if the deadline is not met, the purchaser will be required to pay the tax difference applicable to a second apartment, together with interest and linkage differentials from the date of the original transaction.

Declaration and Payment

The transaction must be reported to the Real Estate Taxation Office within 30 days of signing the sale agreement. The tax must be paid in accordance with the submitted self-assessment within 45 days of the signing date. Even when declaring an intention to sell the old apartment, the initial tax calculated on the basis that the new apartment is a sole apartment must be paid within this period, without waiting for the sale.

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