What Is Mas Shevach?
When you sell real estate in Israel at a profit, you pay capital gains tax on that profit. This tax is called מס שבח (Mas Shevach) (literally "appreciation tax" — from the word "shevach" meaning appreciation or increased value). It is paid to the Israel Tax Authority (Mas Hachnasa) within 60 days of the sale transaction.
The standard rate is 25% on the real (inflation-adjusted) gain. This is an important nuance: the gain is calculated on the real appreciation after deducting CPI inflation over the ownership period, not on the nominal price difference.
How the Gain Is Calculated
The taxable gain is: Sale price − (Purchase price adjusted for CPI).
Step by step:
- Start with your original purchase price
- Adjust it upward by the cumulative CPI inflation rate over your holding period (this is the "linear" method for properties purchased after January 1, 2014)
- Add any capital improvements (renovations with receipts) to your cost base
- Add acquisition costs paid (mas rechisha, lawyer fees, agent fees) to reduce the gain
- The resulting adjusted cost is subtracted from your sale price to determine the taxable gain
- 25% is applied to the resulting gain
Example: You bought an apartment for 2,000,000 NIS in 2015. CPI rose approximately 25% between 2015 and 2025. Your inflation-adjusted cost basis is 2,500,000 NIS. If you sell for 3,200,000 NIS, your real gain is 700,000 NIS. Mas shevach = 175,000 NIS (25% of 700,000 NIS).
The Single Apartment Exemption
The most important mas shevach rule for most homeowners: if you own only one apartment (dirat megurim) and it is your primary residence, you are completely exempt from mas shevach when you sell it, subject to conditions:
- You must have owned the property for at least 18 months as your registered primary residence (teudat zehut address)
- You must not have sold another property with a tax exemption in the previous 18 months
- The exemption applies in full (not a partial exemption) if the sale price is below a threshold (approximately 4,846,000 NIS in 2025–2026). Above this threshold, only the portion up to the threshold is exempt; the remainder is taxed at 25%
- For higher-value properties, a partial exemption calculation applies
This exemption is the primary reason most Israeli homeowners who own one property pay zero mas shevach when they move — they sell their existing apartment, buy a new one, and the gain is fully exempt provided they meet the conditions.
Implications for Olim
Several mas shevach considerations are specific to olim:
- Foreign property sales: If you sold property abroad before or after making aliyah, and that property was not an Israeli property, mas shevach does not apply. However, you may owe Israeli income tax on the gain if it falls outside your 10-year foreign income exemption window
- Properties inherited abroad: Foreign inherited property sold by an oleh may qualify for the foreign income exemption during the 10-year window
- Israeli property sold by a non-resident: Non-residents of Israel who own Israeli property and sell it are subject to mas shevach at Israeli rates (or up to 60% if they are deemed to be a "dealer" in properties). Being an oleh makes you an Israeli resident, so standard resident rates apply
- Record keeping: Keep all purchase documentation, renovation receipts, lawyer invoices, and mas rechisha receipts — all of these reduce your taxable gain when you eventually sell
Practical Steps When Selling
As with mas rechisha on purchase, your property lawyer handles mas shevach on sale. They file the shevach declaration with the Israel Tax Authority, calculate the tax owed (or the exemption applicable), arrange payment, and obtain the clearance certificate needed to deregister the mortgage and re-register the property in the buyer's name.
The entire mas shevach process typically takes 2–4 months. Budget this into your timeline if you need the sale proceeds by a specific date.