Pitfalls in Using the Real Estate Capital Gains Tax Exemption When Selling Your Sole Apartment
- רו"ח יניב גופדה
- Feb 24
- 3 min read
Updated: Mar 27
Many apartment sellers are certain that if they own only one apartment, they can sell it and be exempt from real estate capital gains tax, or Mas Shevach. Most of them remember a historical exemption — which ceased to exist over a decade ago — that allowed selling an apartment tax-free once every four years. Well, that exemption no longer exists.
In practice, the law does grant an exemption when selling a qualifying residential apartment that is the seller's only apartment, but eligibility is not automatic and depends on meeting several conditions. And even then, there are situations where tax may still apply.
Let's set the record straight.
The fact that you own a single apartment does not guarantee a full exemption from capital gains tax.
What is Real Estate Capital Gains Tax (Mas Shevach)?
Capital gains tax (or Mas Shevach) is the tax levied on the profit (the "appreciation") generated from selling a real estate right. The profit is calculated as the difference between the purchase price and the sale price, minus allowable deductions (such as renovation, brokerage, attorney fees, purchase tax, and more).
When is a Real Estate Capital Gains Tax Exemption Available for a Single Apartment?
(Under Section 49b(2) of the Real Estate Taxation Law)
As a general rule, an exemption is available when selling a qualifying residential apartment that is the seller's only apartment, provided the following conditions are met:
It is the seller's only apartment. That is, the seller has no ownership rights in any additional apartment — not even a partial interest — except for certain exceptions specified in the law. In some cases, rights in an apartment received through inheritance or a percentage of ownership in another apartment may also affect eligibility.
An ownership period of at least 18 months. The apartment must have been owned by the seller for at least 18 months from the date of purchase to the date of sale.
The exemption has not been used recently. There are time restrictions on using the exemption in consecutive sales, and the history of prior transactions must be reviewed.
The sale price does not exceed the ceiling set by law. As of 2026, the exemption ceiling stands at 5,008,000 NIS. When the sale price exceeds this threshold, a proportional portion of the gain may be subject to tax.
What "Landmines" Exist When Selling a Single Residential Apartment?
The apartment may meet the definition of "sole apartment," yet real estate capital gains tax may still apply — in whole or in part.
Building right
If the sale price is influenced by additional building rights (for example, the possibility of expansion or future subdivision), part of the transaction's value may be considered compensation for building rights, and that portion may be separately liable for tax. However, in such cases there are sometimes reliefs or reduced taxation mechanisms, so it is important to carry out a professional review rather than automatically assuming the full proceeds are taxable.
Exceeding the exemption ceiling
As mentioned, when the sale price exceeds the ceiling (5,008,000 NIS for 2026), the exemption applies only up to the ceiling, and the remainder is taxed proportionally.
An apartment received as a gift from a relative
When an apartment was received as a gift from a family member (such as a parent or other close relative), there is a "cooling-off period" mechanism before the apartment can be sold tax-free. If the sale takes place before the required cooling-off period has elapsed, the exemption may be denied — even if it is the seller's only apartment.
These are just some of the common cases in which people are caught off guard. In practice, quite a few sellers discover only after the fact that partial ownership of another apartment undermined their exemption eligibility, that a prior transaction affected their ability to use the exemption again, that building rights created a tax liability that had not been accounted for, that a sale price above the ceiling triggered a partial tax, that an apartment received as a gift was sold too early, and more. In some cases, full capital gains tax was paid even though it was possible to reduce the liability or structure the transaction differently.
Therefore, before selling a single apartment, a professional review can prevent costly mistakes and sometimes save significant sums. Furthermore, even if Mas Shevach has already been paid, there are cases in which it is worth examining eligibility for reliefs, an amended assessment, or a refund.
Remember: the fact that you own a single apartment does not guarantee a full exemption from real estate capital gains tax. Eligibility depends on a combination of legal and tax conditions, and on the small details. In real estate taxation, it is often the small details that make the biggest difference.
