What Is Mas Shevach, and How Does it Apply When I Sell Property in Israel?

Mas Shevach, also known as Capital Gains Tax or Appreciation Tax, is a real estate tax applied when you sell property in Israel for a profit. If you sell a property for more than you originally paid, the difference—called the “gain”—is considered taxable income.

This tax can significantly reduce your net proceeds, especially if your property has appreciated in value. Knowing when it applies and how it’s calculated can help you plan better, avoid surprises, and make smarter financial decisions.

This guide refers specifically to residential property, not commercial real estate or land.

How are capital gains calculated?

You’re taxed on the difference between your selling price and your purchase price, minus approved expenses. These may include renovation costs, legal and agent fees, Purchase Tax (Mas Rechisha), and inflation adjustments. Only the net profit is subject to tax.

What is the tax rate?

In most cases, the rate is 25% of the net gain. If you bought the property before January 1, 2014, you might qualify for a reduced Linear Rate, which applies tax only to appreciation after that date. For example, if you bought a property in 2000 and sell it in 2025, you’d only be taxed on the gain accrued from 2014 onward—so just 11 of the 25 years.

Are there any exemptions or reductions to Mas Shevach?

Yes, and understanding them can make a major difference to your bottom line. (Prior to 2014, it was possible to sell one property every four years tax-free, even if you owned multiple homes. This exemption was cancelled as part of a broader reform.)

You may qualify for a full or partial exemption if:

• This is your only residential property in Israel (owning up to 1/3 of any residential property does not count)
• You’ve owned the property for at least 18 months (for new construction, the clock starts from completion of construction)
• No more than 24 months have passed since purchasing a replacement home for this one — or, in the case of a new construction purchase from a developer, no more than 12 months have passed since receiving the Certificate of Occupancy (Tofes 4), whichever is later.
  Note: For purchases made between June 1, 2021, and May 31, 2025, the allowed period is 18 months, not 24.
• You inherited the property from a relative who would have been eligible for an exemption
• The sale is a gift between close family members, under certain conditions
• The property is part of an urban renewal project, such as TAMA 38
• The sale price is under ₪5,008,000 (2025 cap). If above, the first ₪5,008,000 may still be exempt, and the excess taxed at the Linear Rate

There’s also a special case: If you own two inexpensive apartments and are selling both to purchase one larger home, you may be eligible for a “two-for-one” exemption, as long as certain value, timing, and ownership conditions are met. This can provide a full or partial exemption, depending on the total sale price of the two properties.

Do foreign residents pay Capital Gains Tax?

Mas Shevach applies to both Israeli and foreign residents, but the rules differ. As a foreign resident, you are not eligible for key exemptions available to Israeli tax residents—most notably, the full exemption on the sale of a single residential home, even if you own only one property and meet all the other conditions.

However, you may still benefit from the reduced Linear Rate, which taxes only the portion of the gain accrued after January 1, 2014. This can significantly lower your liability, especially if you held the property for many years before that date.

Residency is determined by both physical presence (183 days in Israel) and where your “center of life” is—your home, family, work, and financial interests. Tourists or temporary visitors, even those who stay 183 days, may still be considered non-residents for tax purposes.

When and how do you report Mas Shevach?

You must report the sale to the Israel Tax Authority (Mas Hachnasa) within 40 days of signing the contract. If tax is due, it must be paid within 60 days—unless you’re granted a deferral or exemption. Most filings are submitted online via a self-assessment form, along with supporting documentation.

To learn more about Mas Shevach, listen to this episode of Buyitinisrael’s On The House podcast, featuring real estate attorney Adv. Josh Portman.