How Purchase Tax Works in Israel
Purchase tax (Mas Rechisha) is paid by the buyer on every real estate transaction in Israel. The tax rate depends on whether the property is the buyer's first or additional residential apartment. First-home buyers benefit from an exempt bracket and lower progressive rates. Second-home buyers face a steeper schedule with no exempt amount.
Current Rates for Second-Apartment Buyers
For buyers who already own a residential apartment, purchase tax applies at 8% on the portion up to approximately 6 million NIS, and 10% on any amount above. These rates apply from the first shekel — there is no zero-rate band. The precise thresholds are updated annually by the Ministry of Finance.
Possible Strategies
Selling an existing apartment before completing the new purchase can convert a buyer from "second apartment" to "first apartment" status, dramatically reducing tax. The 18-month rule provides a post-purchase window to sell. Gifting an apartment to a child before purchasing can also reduce exposure — but this carries its own legal and tax consequences and requires careful advice.
Is there a way to reduce purchase tax on a second apartment in Israel?
Yes — the most effective strategy is to sell or transfer your existing apartment before completing the new purchase, which may reclassify you as a first-home buyer subject to lower rates. The 18-month rule can also help if timed correctly. However, each strategy has legal and tax implications that must be reviewed before acting, as mistakes are difficult to reverse after signing.
