Selling a residential property in Israel involves Capital Gains Tax (Mas Shevach) representing 25% of the real profit. However, tax laws offer several exemptions that can lower this tax liability to zero.
1. The Single Residential Home Exemption
This is the most common exemption. A seller is exempt from tax when selling their sole residential home, provided they owned it for at least 18 months prior to the sale and have not utilized this exemption in the preceding 18 months.
2. Inherited Property Exemption
An heir of a residential property may be exempt from capital gains tax upon its sale, even if they own other properties, provided they are a direct descendant or spouse, the deceased owned only one home, and the deceased would have been exempt if alive.
3. The Beneficiary Linear Calculation
For sellers who do not qualify for a full exemption (e.g. investors), the pro-rata linear method taxes gains accumulated only after January 1, 2014, exempting any gains accrued before that date.