Significant Tax Benefits for Olim Buying Homes in Israel

The Knesset Finance Committee passed an amendment yesterday that significantly reduced the purchase tax for new immigrants (Olim) buying property in Israel. Under the new regulations, Olim purchasing a single home valued up to 6 million shekels will pay a reduced purchase tax rate of just 0.5%, compared to the standard rates of 3.5%- 5%.

Previously, Olim paid a 0.5% tax on the first tier of property value up to approximately 2 million shekels and 5% on any amount above that, whether for a primary or additional residence. This policy inadvertently favored those purchasing additional properties, against the government’s intention to increase the tax burden on investors to lower housing prices. The new amendment ensures that Olim buying their first home receives the most benefit, with standard tax rates applying to any additional properties purchased.

Specifically, Olim will be exempt from purchase tax on the first 2 million shekels of a property’s value. A 0.5% tax will be levied on the portion of the property’s value between 2 and 6 million shekels. For properties valued above 6 million shekels, the standard tax rate of 5% applies, with the benefit not extending to luxury apartments valued over 20 million shekels.

Olim, who purchased a home before the new regulations were passed, now can choose whether to apply the previous or new rules, but they cannot mix and match benefits from both to avoid double advantages. The general purchase tax rates for the wider public in Israel start at 3.5% for properties valued above 1.98 million shekels, rising to 5% and then 8% for higher-value homes and up to 10% for the most expensive properties.

Finance Minister Bezalel Smotrich and Immigration and Absorption Minister Ofir Sofer praised the decision, emphasizing the importance of supporting Olim, particularly during challenging times. They highlighted the increasing interest in Aliyah and the government’s commitment to making the transition as smooth as possible for new immigrants.

This policy change is expected to provide significant financial relief to Olim, encouraging more people to make Aliyah and invest in homes in Israel.