Israel splits the gain, and your landing date decides where the line falls
Sell a foreign asset after your ten-year oleh window closes and Israel taxes part of the gain, not all of it and not none of it. The exempt share is set by three dates: the day you bought the asset, the day you became an Israeli resident, and the day you sold1. Nobody born here has this arithmetic.
General information, not advice
Where exactly does the line fall on your ownership timeline?
Draw the ownership of the asset as a single line and mark four points on it. Point one is the day you bought it, which for many olim is years or decades before Israel entered the picture. Point two is the day you became an Israeli resident as an עולה חדש (oleh chadash), which starts your clock. Point three is ten years after that, when the window on foreign-source income and gains closes12. Point four is the day you sell.
Everything from point one to point three sits on the exempt side. Everything from point three to point four sits on the taxable side. Israel then charges you on the taxable side expressed as a share of the whole gain. Two things about that arrangement surprise almost every oleh who meets it.
- The pre-aliyah years count as exempt years. The decade you held the asset while living in Manchester or Cape Town, paying no attention to Israel whatsoever, lands on the sheltered side of the split. The longer you owned it before you landed, the smaller the taxable share becomes.
- Year ten is a slope, not a cliff. Selling on the last day of the window and selling six months later are not a zero-versus-everything choice. Six months past expiry on a twenty-year holding is a very small taxable share.
What the arithmetic below is, and is not
The examples that follow apportion the gain across the ownership period on a straight-line basis: the stretch from purchase to the end of the window against the whole stretch from purchase to sale. That is the shape of the rule, and it is enough to make the sell-or-hold decision legible. It is not a substitute for the statutory computation, which sits in the Income Tax Ordinance and in how the Israel Tax Authority applies it to your particular asset6. Treat every shekel figure below as illustrative and take your own dates to an accountant.
Three olim, one identical gain: what the purchase date is worth
The purchase date is worth real money, and it is the one variable most people never think of as a tax input. Take three olim who all became Israeli residents on 1 January 2026, so all three windows close on 31 December 2035. All three hold the same foreign asset, all three sell it on 31 December 2040, five years after expiry, and all three realise a gain of $200,000, roughly 740,000 shekels at an illustrative 3.7 shekels to the dollar.
The Israeli capital gains rate for an individual is capped at 25%°, with a further 5% surtax reaching non-earned income above 721,560 shekels° in 20265. The home-country column below assumes a US citizen paying the 15% long-term net capital gain rate on the entire gain9, because no home country apportions anything.
| Asset bought | Total gain | Exempt slice (Israel) | Israeli-taxable slice | Israeli tax at 25% | US tax at 15% on the whole gain | Net after both, before any credit |
|---|---|---|---|---|---|---|
| 2011, fifteen years before aliyah (25 of 30 owned years fall inside the window) | $200,000 / 740,000 shekels | 83.3%, $166,667 / 616,667 shekels | 16.7%, $33,333 / 123,333 shekels | $8,333 / 30,833 shekels | $30,000 | $161,667 |
| 2024, two years before aliyah (12 of 17 owned years fall inside the window) | $200,000 / 740,000 shekels | 70.6%, $141,176 / 522,353 shekels | 29.4%, $58,824 / 217,647 shekels | $14,706 / 54,412 shekels | $30,000 | $155,294 |
| 2029, three years after aliyah (7 of 12 owned years fall inside the window) | $200,000 / 740,000 shekels | 58.3%, $116,667 / 431,667 shekels | 41.7%, $83,333 / 308,333 shekels | $20,833 / 77,083 shekels | $30,000 | $149,167 |
Read the last two columns against each other. The Israeli number moves by $12,500 across the three cases purely because of when the asset was bought. The US number does not move at all, because US law is not measuring anything against your aliyah date. That divergence is the whole subject of this page.
Worked example: the same seller, two returns
Take the middle case and walk it. Miriam bought the asset in 2024 while still living abroad, made aliyah on 1 January 2026, and sells on 31 December 2040 for a $200,000 gain. Her window ran to the end of 2035, so 12 of her 17 owned years sit inside it.
Her Israeli return. Roughly 29.4% of the gain is taxable, about $58,824, which is about 217,647 shekels at 3.7 to the dollar. At 25% that is roughly 54,412 shekels of Israeli tax. Israel assesses this in shekels, so the shekel figure is the real one and the dollar figure is the translation.
Her US return. The IRS taxes the whole $200,000 gain, because US citizens are subject to tax on worldwide income from all sources7, and amounts on a US return must be translated into US dollars10. At 15% that is $30,000, and it would have been $30,000 whether she sold in year nine or year fifteen.
Where the credit does not reach. A foreign tax credit requires a tax that was imposed on you and that you paid or accrued8. On the 70.6% that Israel exempted, no Israeli tax exists, so there is nothing to credit. Whether the Israeli tax on the remaining slice can be credited depends on how the gain is sourced under US rules, which is a separate question from the Israeli split and does not track it.
The Israeli side, in isolation
On the Israeli side alone the picture is self-contained: foreign-source, sold inside the window, no Israeli מס הכנסה (mas hachnasa) on the gain14. Foreign-source, sold after the window, apportioned. Israeli-source at any moment, such as shares in an Israeli company or an Israeli apartment, taxed under ordinary rules from your first day of residency with no oleh discount attached. Nothing in that paragraph depends on what your former country does.
One point deserves emphasis because it undoes a common instinct. There is no revaluation at either end of the window. Israel does not stamp your portfolio at market value on the day you land, and it does not reset your cost at the ten-year mark. The mechanism is a proportion of the whole gain, which means a purchase confirmation from 2011 is a live tax document in 2040. Olim who became Israeli residents from 1 January 2026 also file an annual דוח שנתי (doch shenati) and declare foreign assets even while the income stays exempt from tax3, so the paperwork habit starts early either way.
The home-country side, in isolation
Your former country apportions nothing, because your aliyah date is not a fact in its tax code. It applies its own residence and sourcing rules to the entire gain, and it reaches its answer without reference to what Israel charged or exempted.
The treaty side, in isolation
A treaty allocates taxing rights and relieves double taxation, and the US-Israel income tax convention is the instrument for that pair13. What a treaty does not do is manufacture an exemption where one country has decided not to tax. This produces the outcome olim find hardest to accept: because Israel exempted most of the gain, there is very little double taxation left to relieve, so the other country's claim stands close to full strength. The Israeli exemption is not a shield against your home country, and in the US case it strips out the credit that would otherwise have reduced the US charge8.
US persons: if the asset is a pooled fund, the Israeli split is beside the point
If you hold US citizenship or a green card and the foreign asset is a non-US pooled fund, stop modelling the Israeli apportionment and look at the US wrapper first. Non-US mutual funds and ETFs are generally passive foreign investment companies, which carry their own reporting on Form 862111. Under the default regime the gain is not simply taxed at a rate. It is allocated to each day in your holding period, the portion allocated to prior PFIC years is taken out of current income and subjected instead to a separate tax and interest charge under section 1291(c), and the portion allocated to the current year and to pre-PFIC years is taxed as ordinary income12.
Notice what that means. Both systems apportion the same gain across a period, and neither apportionment knows the other exists. Israel measures against your aliyah date and the ten years that follow it. The US measures against your holding period and the years the fund was a PFIC. The denominators are different, the treatment of each slice is different, and the Israeli exemption cannot switch the US computation off. UK, Canadian, South African, French and Australian olim do not carry the PFIC rule at all, though their own home-country obligations may continue for a period after aliyah.
There is a second edge to this for US persons. An Israeli מס הכנסה (mas hachnasa) view of an Israeli-domiciled fund is that it is an Israeli asset, so the ten-year window never covered it in the first place. The US view is that it is a PFIC. An oleh who reacts to an expiring window by rotating out of foreign holdings and into Israeli funds can therefore lose the Israeli shelter and acquire a US problem in the same trade.
What newcomers get wrong about year ten
- Treating the deadline as a cliff. The panic sale three months before expiry is often worth very little on a long-held asset, because the taxable slice on a twenty-year holding sold shortly after expiry is small. Selling into a bad market to beat a date can cost more than the tax it avoided.
- Expecting a step-up. Neither aliyah nor the ten-year mark resets your cost. The asset declaration that post-2026 olim file records what you own; it is a disclosure duty, not the grant of a new basis3.
- Assuming the home country mirrors the split. It does not. The US taxes the whole gain7, and a UK non-resident position or a Canadian or South African exit charge each run on their own logic141516.
- Believing zero Israeli tax means a smaller total bill. For a US person it can mean the opposite, because a credit needs a foreign tax actually paid or accrued8.
- Losing the purchase paperwork. The whole split is built from dates. A 2011 contract note from a broker you left behind two countries ago is the document that proves your exempt share, and reconstructing it in 2040 is not always possible.
- Confusing the two currencies. Israel assesses in shekels and the IRS requires amounts translated into US dollars10, so the two authorities are not even looking at the same number before either of them applies a rate.
Check your understanding
Two olim landed on the same day and hold the same foreign asset with the same gain. One bought in 2011, the other in 2029. Both sell five years after their windows close. Who owes Israel more, and why?
Ask which stretch of the ownership line sits on the exempt side of the split.
Selling a foreign asset after your ten-year oleh window closes does not make the whole gain taxable in Israel, and it does not leave it exempt either. Israel splits the gain by calendar: the stretch of your ownership from the purchase date to the end of the window sits on the exempt side, and the stretch from the end of the window to the sale date is taxable, expressed as a proportion of the total gain. Because the purchase date is the starting point, the years you owned the asset before you had any connection to Israel count as exempt years, so two olim who landed on the same day with the same gain owe different amounts depending on when they bought. Your home country apportions nothing and taxes the whole gain on its own rules, which is why a foreign tax credit rarely lines up, and for a US citizen holding a non-US pooled fund the default PFIC regime allocates the gain across a completely different period with a separate tax and interest charge attached.
No. Relief does not switch off at expiry. The gain is apportioned across your ownership period: the part running from the purchase date to the end of your window stays exempt, and the part after expiry is taxable. A long-held asset sold shortly after the window closes therefore has only a small taxable slice.
On a straight-line apportionment running from the purchase date, yes. That is the counterintuitive part: the years you owned the asset while living abroad and paying no Israeli tax at all push the ratio towards exempt. It is also why an asset bought after aliyah has the largest taxable share of the three cases modelled on this page.
That is a decision, not a rule, and the arithmetic often argues against panic. Selling on the last day of the window gives a clean Israeli zero, but selling a long-held asset a year later leaves only a small taxable slice. Weigh that slice against market timing, transaction costs and your home-country charge, which does not move either way.
No. Neither date is a revaluation event. Israel does not treat your landing as a purchase at market value and does not reset your cost when the window closes. The mechanism is a proportion of the whole gain, which is why the original purchase documentation stays relevant for as long as you hold the asset.
It does not. US citizens are subject to tax on worldwide income from all sources wherever they live, so the IRS looks at the entire gain. The Israeli exemption can actually raise your combined bill, because a foreign tax credit requires a foreign tax that was imposed on you and that you paid or accrued, and an exempt slice produces none.
For a US person that changes the question. Non-US pooled funds are generally passive foreign investment companies with their own Form 8621 reporting, and the default regime allocates the gain to each day of your holding period, taxing the prior PFIC-year portion through a separate tax and interest charge. The Israeli apportionment does not affect that computation.
If you became an Israeli resident on or after 1 January 2026, expect to. Olim in that group file an annual return and declare foreign assets even where the income remains exempt from tax. Exempt and unreported are no longer the same thing, so keep sale contracts and purchase confirmations filed rather than discarded.
Three dates and one cost figure: the acquisition date, the date you became an Israeli resident, the disposal date, and what you originally paid. Everything else is arithmetic. The acquisition record is the one most olim cannot reproduce years later, so retrieve it from your old broker or bank while the account still exists.
Your next move: date the asset, date yourself, then decide