Tax in Israel
See what Israel's tax rules do to your property portfolio.
What Freeholt models for property, income and retirement in Israel, and what it does not.
Free to start. No card. Rules reviewed 22 August 2026.
Modelled here
- Tax on rental income
- Capital gains on a sale
- Duty on purchase (approximate)
- Income tax beyond the rent
- Dividends, interest and share sales
- Retirement savings
- Inheritance and what happens on death
ILS · Rates as at 22 August 2026 · Rates editable in Settings · Estimates, not advice
Residents can pick a flat 10% tax on gross residential rent or a monthly exemption (ILS 5,654 a month in 2026, frozen through 2027); non residents usually lose the exemption but can still elect the 10% flat rate, and may owe tax at home too.
How rental income is taxed in Israel
For a resident owner: Rent up to ₪5,654 a month is exempt, and the exemption then shrinks shekel for shekel until it runs out at twice that. Otherwise there is a choice: a flat 10% on the gross rent with no deductions, or ordinary rates on the net after costs. For an owner living abroad and renting this out: Rent up to ₪5,654 a month is exempt, and the exemption then shrinks shekel for shekel until it runs out at twice that. Otherwise there is a choice: a flat 10% on the gross rent with no deductions, or ordinary rates on the net after costs.
Interest and losses
A rental loss brings no relief: it cannot reduce other income, and it does not carry forward.
Capital gains on a sale
Gains are taxed at a flat 25%. A 5% surtax applies to the part of the gain above ₪721,560, measured after other income in this country.
Annual property tax while holding
There is no annual property or land tax here. What people pay instead is arnona, a municipal charge by built area that the occupier pays, so a tenant normally carries it.
What it costs to buy
Purchase duty here is more than a single rate, and Freeholt prices the published rules rather than an average. Purchase tax (mas rechisha) runs high for additional/investment homes and most foreign buyers. ~8% up to ~ILS 6.06m and 10% above, with no 0% bracket.
Can a foreign buyer purchase here?
A foreign buyer cannot hold the freehold. Ownership is a lease, which is a wasting asset. Foreigners may buy on the same terms as citizens, but about 93% of land is state owned (State, Development Authority and JNF) and administered by the Israel Land Authority: what a buyer acquires is a registered long lease, typically 49 or 98 years and renewable, often capitalised so no recurring rent is due. About 7% is private freehold. All rights are registered in the Tabu.
Income tax in Israel, beyond the rent
Progressive, up to 47%. The bands run Up to 84,120 at 10%; 84,120 to 120,720 at 14%; 120,720 to 228,000 at 20%; 228,000 to 301,200 at 31%; 301,200 to 560,280 at 35%; Above 560,280 at 47%. Plus 3% on income above 721,560. Rental profit is taxed separately, not on this ladder. Figures in ILS, as verified 22 August 2026.
Dividends, interest and share sales
How Israel taxes investment income. For dividends: Flat 25%. 30% for a substantial shareholder. An extra 5% applies above a high income threshold. For interest: Flat 25%. An extra 5% applies above a high income threshold. For share sale gains: Flat 25%. 30% for a substantial shareholder. An extra 5% applies above a high income threshold.
Pensions and retirement savings
EET. Deductible in, taxed out. Contributions come off taxable income. No annual cap is modelled. Growth inside the fund is untaxed. Withdrawals can start from age 60. The rest is taxed as income.
Inheritance and what happens on death in Israel
No inheritance, estate or gift tax. But something else stands in its place. That is a researched finding rather than a gap in the model, and it is not the end of the story: Freeholt holds three rules that stand where a transfer tax would be in another country, broadly what a beneficiary's cost base becomes and when a charge falls due, and this page does not attempt to summarise them. These rules were verified 21 July 2026. Freeholt models the country's rules rather than any particular will, so what an estate pays still depends on who inherits and what is in it.
Worth knowing about tax in Israel
Israel's band thresholds are frozen for 2025 to 2027, with the 20% and 31% bands separately widened in 2026. Both are current law rather than stale figures.
How Freeholt models Israel
Every rate above is priced from Freeholt's own table for Israel and runs through the whole projection: rental income, a modelled sale and the annual holding costs all use the same figures. They are also defaults that can be edited in Settings, so a position that differs, or a rate that changes before we catch it, can be corrected and the projection reprices around it.
What running this property costs
In Israel this covers vaad bayit (building committee), insurance and any management. Arnona (municipal tax) is usually paid by the tenant.
How borrowing works here
Mortgages mix prime, fixed and CPI linked tracks (variable capped ~two thirds); LTV is capped near 50% for investment/foreign buyers.
What actually happened here
This country's own record, one year at a time. Nothing on this page is borrowed from another country. Move across a chart to read a year.
Price return, so dividends are not counted.
Recent rule changes in Israel
- 2025-01-01 Indexation of the amounts in the tax statutes is FROZEN for 2025 to 2027, so the ILS 5,654 exemption and the purchase tax bands do not move on 16 January each year the way they used to. Next indexation event: 16 Jan 2028.
- 2025-01-01 A further 2% surtax on capital source income above ILS 721,560 sits on top of the existing 3%, so a gain in that band carries 5%.
- 2025-01-16 Purchase tax on an ADDITIONAL apartment (8% then 10% above ILS 6,055,070) is a temporary provision running to 31 Dec 2026; no extension was legislated as at 21 Aug 2026, and if it lapses the lower statutory bands revive.
What Freeholt models here
- ModelledTax on rental income
- Resident and non resident rates, with interest and losses treated under the local rule.
- ModelledCapital gains on a sale
- Priced in the year of the sale under the rules of that year.
- ApproximateDuty on purchase
- The published scale is priced from the rules in force, which differ by band and are summarised here.
- None hereAnnual property or land tax
- No annual charge on the property itself here.
- ModelledIncome tax beyond the rent
- Salary and other income, stacked with the rent.
- ModelledDividends, interest and share sales
- Investment income and gains, with the local allowances.
- ModelledRetirement savings
- Contributions, the fund and the way out.
- ModelledInheritance and what happens on death
- Who pays, and on what, when property passes on.
What Freeholt does not model here
- Treaty relief between this country and the owner's country of residence
What the figures above leave out (12)
- Israeli residential rent has its own flat 10% track and never joins this ladder, so rental profit must not be stacked onto it.
- Israeli credit points are not modelled, so the figure is overstated, most of all at lower incomes.
- An Israeli non resident is given no credit points here. A narrow carve out for an eligible foreign resident exists and is not modelled.
- Israel's 5% surtax on capital income (mas yesef) applies once all of the taxpayer's income together passes ₪721,560. The income tested here is the other taxable income entered plus this one receipt, so capital income from elsewhere (other accounts, other kinds of investment, a property gain) that counts towards the same threshold is not seen, and the surtax is understated for anyone with capital income beyond what was entered.
- Whether the holder counts as a substantial shareholder (10% or more of the company's profits, votes or other means of control, taxed at 30% rather than 25%) is taken as stated today. A commonly cited rule that looks back twelve months, so that a holding since cut still counts, could not be verified and is not applied; if it does apply, someone who dropped below 10% during the year is shown 25% where 30% is due, an understatement.
- Israel's 25% on CPI linked interest applies only to the real, inflation stripped part of it. It is charged here on the full nominal amount, so tax on a linked deposit or bond is overstated by 25% of the inflation component, which in a high inflation year is most of the coupon.
- Interest on an Israeli deposit or bond that is not CPI linked is taxed at 15%, not the 25% charged here. Such interest is overstated by 10 percentage points.
- Israel taxes the inflation adjusted gain; this uses the raw gain, which overstates it when inflation is high.
- A gain on an Israeli bond, loan or other debt instrument that is not CPI linked is taxed at 15% (20% for a substantial shareholder), not the general 25% (30%) charged here. Such a gain is overstated by 10 percentage points.
- Israel relieves an employee's pension contribution through a tax credit at a fixed rate (reported as 35%, a figure not yet verified) rather than a deduction at the employee's own marginal rate, but a deduction is what is modelled here. For a marginal rate below 35% the relief shown is smaller than the credit actually given; above 35% it is larger. Which way this is wrong depends on the bracket.
- Israel does cap pension contributions (the ceiling is pegged to the national average wage), but its 2026 monthly figure came back as two conflicting numbers, so neither is used and no ceiling is enforced here. A contribution above the real cap is shown as fully relieved and is never warned about, so the relief on a large contribution is overstated.
- Israel exempts part of what its law calls a qualifying pension annuity: for 2026, 57.5% of a monthly ceiling of ₪9,430, roughly ₪5,422 a month tax free, on a percentage that keeps rising through 2028. That exemption is not applied and the whole annuity is taxed, so the tax shown is too high for every retiree with a qualifying pension.
Coverage deepens country by country. Every figure is an estimate, not advice.
Compare with another country
Each page is built from the same table the app runs on, so the figures line up side by side.
Compare Israel with another country — rent, gains, annual tax and duty, side by side.
Questions people ask
- Does Freeholt model Israel property tax?
- Yes. Rental income tax, capital gains on a sale and duty on purchase are priced from Freeholt's own rate table for Israel. Duty on purchase carries a simplification that the page names beside the figure. Israel levies no annual property or land tax, so there is nothing to price. Any rate or threshold can be corrected in Settings so the whole projection reprices. Every figure is an estimate, not advice.
- How is rental income from Israel taxed if I live somewhere else?
- Rent up to ₪5,654 a month is exempt, and the exemption then shrinks shekel for shekel until it runs out at twice that. Otherwise there is a choice: a flat 10% on the gross rent with no deductions, or ordinary rates on the net after costs. Tax may also be due in the country of residence, with credit for what was paid here. Estimates only, not advice.
- What are the Israel figures as at?
- The rate table for Israel was last reviewed on 22 August 2026. Freeholt date stamps every country rather than implying all of them were checked on the same day. Estimates only, not advice.
Model a property in Israel alongside everything else you own: see the year your portfolio starts paying you back.