What Is the 18-Month Rule?
Under Israel's Real Estate Taxation Law, a person who owns two residential apartments may sell one of them tax-free — provided the sale is completed within 18 months of acquiring the second property. This window is designed to allow people who bought before selling their original home to close the transaction without incurring capital gains tax.
Conditions for the Exemption
- The seller must have held only one apartment before the new purchase.
- The second apartment must have been purchased before the first was sold.
- The sale of the original apartment must occur within 18 months of the new purchase.
- The sold apartment must qualify as a single residential unit (under the meaning of the law).
Common Mistakes to Avoid
Missing the 18-month window — even by a single day — means the sale becomes taxable at the full capital gains rate. Receiving a gift apartment, partial inheritance, or owning a share in a property through family can all disqualify the exemption. Legal review before signing a purchase contract is essential.
Can I sell my old apartment tax-free after buying a new one in Israel?
Yes — under the 18-month rule, if you owned one apartment and then bought a second one, you may sell the original apartment tax-free as long as the sale is completed within 18 months of the new purchase. Missing this deadline results in full capital gains tax liability.
