Real estate · · 7 min read
Purchase tax on a home in Israel: what it is, when and how to plan
Plan for purchase tax in plain words: what it applies to, a single home versus an additional one, when it's paid, and how it fits into your down-payment plan.
The spreadsheet looks finished. The price of the flat on the top row, the down-payment percentage below it, then what you've saved and what's still missing. Two years of deposits, and a number that finally looks within reach. Then, in the first call with the lawyer, a passing remark: "And don't forget the purchase tax."
The spreadsheet isn't finished any more. With it comes the most irritating feeling money can produce: feeling like suckers who planned everything and forgot the one thing everyone else apparently knew.
From there, the familiar paths: search for videos on "buying a home without purchase tax", assume the lawyer will sort it out, or simply not check, because the word "tax" ties the stomach in a knot.
Part of you wants the full number, down to the last shekel. Another part would rather the target stayed as it is: "If we add another line, the flat moves further away. Let us enjoy being close." That part protects your motivation, and that's no small thing. But a target that looks close and leaves out costs moves away at the worst possible moment: the week you sign.
Why purchase tax drops out of the plan
It didn't happen because you weren't clever enough. It happened because the tax isn't in the price you see. The listing shows a price. The bank talks about a down-payment percentage. People plan around the prominent number, and costs shown separately from it get less weight. Economists who tested this in a store (Chetty, Looney and Kroft, 2009) found shoppers reacted less to a tax that wasn't on the price tag. That isn't irresponsibility. It's what the eye does when it's shown one big number.
The down payment takes planning on its own: equity of 25% for a first home, 30% for upgraders and 50% for an investment property, according to Bank of Israel directives as reported by Mashkanta Guru (September 2026). Purchase tax comes on top of that, not out of it.
Purchase tax brackets: a single home versus an additional one
Purchase tax (mas rechisha, מס רכישה) is paid by whoever buys a right in real estate, such as a flat. It is set out in the Real Estate Taxation Law (Betterment and Purchase), and the Tax Authority collects it. It isn't a fine or something to "get around"; it's a predictable line you can work out in advance.
Two things mainly decide how much it is:
- Whether this is your only home or an additional one.
- The price of the home relative to the brackets. The Tax Authority publishes the amounts every year on 16 January, and the single-home brackets are currently frozen until 15 January 2028.
Here are the brackets today. Each row applies only to the part of the price that falls inside it:
| Part of the price | Single home | Additional home |
|---|---|---|
| Up to 1,978,745 ILS | 0% | 8% |
| Above 1,978,745 up to 2,347,040 ILS | 3.5% | 8% |
| Above 2,347,040 up to 6,055,070 ILS | 5% | 8% |
| Above 6,055,070 up to 20,183,565 ILS | 8% | 10% |
| Above 20,183,565 ILS | 10% | 10% |
Source: Israel Tax Authority, Real Estate Taxation Directive 1/2025 (16 January 2025). The single-home brackets are frozen and apply until 15 January 2028; the additional-home rates are a temporary provision extended to 31 December 2026. Tax figures are as of October 2026; brackets change.
An example: on a 2,500,000 ILS home that is your only one, the tax by this table is about 20,538 ILS. On the same home as an additional one: 200,000 ILS. Check the calculation for your own price, and your exact situation, in the purchase tax simulator on the Tax Authority's website.
When is it paid? According to the Tax Authority's 2026 guide for buyers of real estate, the transaction date is usually the day the contract is signed, or the day a written memorandum of agreement was signed if that came first. Tax on your self-assessment is paid within 60 days of that date, but the law (section 51) defers payment until the earliest of three things: you take possession, you have paid more than 50% of the price, or you receive a power of attorney to register the home in your name. With a new-build paid in stages, that can come after signing. The lawyer handling the deal usually files the report; check your deal's dates with them. The money itself leaves your account, which is why it belongs in your plan.
Some situations are more involved: upgraders who haven't yet sold their previous home, an inherited flat, buying with a partner. For your specific case, check with a lawyer or a tax adviser; the decision is yours.
A savings target with the tax already inside
A savings target for the home that includes purchase tax from day one. No hunting for ways around it, no discovering it the week you sign, no becoming tax experts. What you gain: a target that won't jump again by surprise.
From the Tax Authority's calculator to your plan
Step 1: know which situation you're in
Single home, additional home, or something more involved. One sentence, on paper. If you're unsure, that's the first question for the lawyer.
Step 2: run the official simulator
Open the purchase tax simulator on the Tax Authority's website, enter the price you're aiming at and your situation, and write down the result. If you're torn between two price ranges, run both.
Step 3: add the amount to the target
Purchase tax goes into the plan as a one-off expense, next to the down payment, the lawyer's fee and the appraiser. The block below is an example: a first and only home at 2,500,000 ILS. The down payment (25%) is 625,000 ILS and purchase tax by the table is about 20,538 ILS, so the full target is 645,538 ILS. Move the monthly deposit and see when you get there. Without the tax line, the same deposit would have got there about three months sooner.
The full target for a 2,500,000 ILS home, purchase tax included
Time to the target
66 months
Every line of the target
0 of 5 done
In AlphaHome: in the savings plan, enter purchase tax as a one-off future expense with a date. The app works out the monthly deposit required and warns you if the plan won't reach its target. Alongside it, a savings goal called "The home" with an amount and a date you update as the picture changes.
Step 4: one question for the lawyer
Once you have a number from the simulator, the question for the lawyer is short: "This is our situation, this is what we worked out. Is there anything we haven't taken into account?"
When the amount pushes the target date back
You added the tax, and the target moved by several months. The new date isn't a failure. It's the real date, which is exactly what you wanted to know. Today, decide one thing: change the monthly deposit, or accept the new date. Both are legitimate. For next time, run the simulator again when the brackets are updated or when your target price changes.
A video promises "a home with no purchase tax". There's no trick here, and that's fine. By the table, a single home up to 1,978,745 ILS pays no purchase tax, no method needed. Beyond that, if something about your situation is unusual, a lawyer or tax adviser will tell you what applies to you; the decision is yours. Today, go back to the official simulator and to your own number.
Saving for the full target
A target without the tax will surprise you the week you sign. The full number may be further away, but it's real, and a real target holds. If you're building the down payment now, the wider picture is in the down payment in 2026.
On signing day, when someone mentions purchase tax, you'll have the most boring answer there is: "It's already in the plan." That's what you're saving for: the biggest number of your life, with no surprise in it.
This week, run the Tax Authority's purchase tax simulator on the price you're aiming at, and add the result as an expense in the savings plan.
Do one thing this week
Open AlphaHome, record this month's income and fixed charges, and see how much is really free to spend. Everything in this article starts from that number.