Capital gains tax on real estate (mas shevach, מס שבח) is the tax on the profit made when you sell a right in real estate: the difference between the sale value and the purchase value, minus the expenses you had on the property. It is exactly because of these deductions that so many refunds arise: many sellers report the transaction without claiming all the expenses they are allowed to, and pay more tax than they need to.
Sold an apartment in recent years? The capital gains tax refund eligibility check takes three minutes, and it is free.
Which expenses you may deduct from the gain
The list of deductions appears in section 39 of the Real Estate Taxation Law, and over the years the courts have recognized additional expenses too, so the list is not a closed one. These are the items people forget most often:
- Betterment levy (היטל השבחה) paid to the local planning committee. This is usually the largest amount that gets forgotten, and it is deductible.
- Improvement and renovation expenses on the property, when you have receipts. Old renovations count too.
- Lawyer's fees, for both the purchase and the sale.
- Brokerage fees on the purchase and on the sale.
- The purchase tax you paid when you bought the property.
- Appraiser, licensed surveyor and fees related to the transaction.
- Real interest on the mortgage used to buy or improve the property.
- Capitalization fees paid to the Israel Land Authority, for leasehold property.
Every deduction needs supporting documentation. An invoice from a renovation contractor from 2015 is still worth money today, so it is worth searching your files before giving up.
Exemptions and preferential calculation
Beyond deductions, there are routes that reduce the tax itself and sometimes bring it to zero:
- Qualifying residential apartment exemption: when you sell a single residential apartment, there is an exemption up to a ceiling set by law and updated from time to time.
- Preferential linear calculation: for apartments bought before January 1, 2014, the gain accrued up to that date is tax-exempt, and tax applies only to the part accrued after it. This difference can amount to tens of thousands of shekels.
If the sale was reported without the right route, you can ask for the assessment to be amended.
How to ask for the money back
The correction is made with a request to amend the assessment, Form 7085 (טופס 7085), filed with the Real Estate Taxation offices (מיסוי מקרקעין). The request relies on section 85 of the Real Estate Taxation Law, which allows a self-assessment or a best-judgment assessment to be amended, either at the taxpayer's initiative or at the director's.
The window is shorter than you might think: you can request an amendment up to four years from the day the assessment was made, meaning from the day the self-assessment was approved or a best-judgment assessment was issued. This is unlike tax refunds on salary, where the window is six years. If you sold an apartment more than four years ago, you can no longer amend.
The power of attorney needed here is a different one
When a representative files Form 7085, a power of attorney must be attached to the request. The power of attorney recognized by the Israel Tax Authority, Form 2279 (טופס 2279), covers income tax, withholding, VAT and property tax, and it does not cover real estate taxation. That is why a dedicated power of attorney is needed, one that identifies the property and the assessment in question and authorizes us to review the file and submit the request.
You can sign it here on the site, and it applies only to the property you specify. It does not allow us to receive any money: a tax refund is always transferred directly to your bank account.
What to prepare
- The capital gains tax assessment you received, or the self-assessment filed in your name.
- The purchase and sale contracts.
- Receipts for renovations, brokerage, lawyer, appraiser and betterment levy.
- A confirmation of the mortgage interest from the bank.
Some of the documents are already in the Israel Tax Authority's systems, and we will retrieve those ourselves once you sign a power of attorney. Only you can provide the private receipts, such as renovations and brokerage.
Frequently asked questions
I sold an apartment and paid capital gains tax. How do I know if I overpaid?
Compare the expenses reported in the assessment with the expenses you actually had. If there is a gap, and especially if a betterment levy or a significant renovation was not deducted, there is likely room for an amendment.
Could the amendment increase the tax instead of reducing it?
Section 85 allows amendments in both directions, so the full picture is checked before a request is filed. If the check shows there is no refund, we simply do not file.
How long does it take to get the money?
Once the assessment is amended, the refund is transferred to your bank account with linkage differentials and interest. Processing time varies between Real Estate Taxation offices.