Since June 1, the grace period for obtaining an exemption from tax on a sole dwelling for move-up buyers has increased to 24 months from 18 months. This follows the expiry of the provisional order that shortened the grace period in which the sale of a sole home can be exempt from the betterment levy, and purchase tax on the purchase of the new home is at a reduced rate.
Until May 31, people moving home could buy a home and pay purchase tax at the rate for a sole dwelling only if they sold their existing home within eighteen months. The Ministry of Finance and the Israel Tax Authority planned to extend the provisional order that set the short deadline, but failed to complete the necessary legislation before the order expired. The result is that people who buy a new home will have longer, up to 24 months, to sell their existing home and obtain tax relief, until the legislative process is complete.
The longer grace period can be a significant benefit. Those who sell their existing home within the period are granted a complete exemption from the betterment levy for a selling price of up to NIS 5,008,000. The purchase of the new home is exempt from purchase tax up to NIS 1,978,745, and up to NIS 2,347,040 the rate is just 3.5%. For someone considered to be buying an additional home, rather than just switching homes, the rate of purchase tax is 8% up to NIS 6,055,070, and 10% thereafter.
At this stage, it is not clear how long the legislative process making the shorter, eighteen month grace period a permanent provision of the law will take. It could a month, two months, or even a year. Meanwhile, anyone switching homes will have 24 months to sell the old home from the date of purchase of the new one and still be able to claim the tax benefits. The longer grace period does not apply to those who bought their new home before June 1. They still have only eighteen months in which to sell the existing home before becoming liable to the tax rates that apply to buyers of a second home.
Published by Globes, Israel business news – en.globes.co.il – on June 4, 2025.
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