Israel improves tax breaks for new immigrants to help first-time homebuyers
Tax changes seek to lower the costs for new immigrants on first-home purchases worth up to NIS 6 million, while cooling demand for investors to bring down housing prices
Sharon Wrobel is a tech reporter for The Times of Israel.
To encourage new immigrants to come and live in Israel, the Knesset Finance Committee approved changes to tax benefits to lower the cost for buyers of a first home and make it more affordable to settle down in the country.
The Finance Committee last week passed an amendment to the property tax benefits for new immigrants, also known in Hebrew as olim, which exempts first-time buyers of a home from paying purchase taxes on the first NIS 1.98 million ($515 million) of the value of an asset bought in 2024.
On any amount above that and up to a value of NIS 6 million of the purchase price of a first home, immigrants will be taxed at a reduced rate of 0.5% versus 5% until now. Purchases of homes above NIS 6 million will be taxed at the standard tax rate for Israeli citizens, according to the new regulation, which applies to first-time buyers of a residential property.
Buyers of a high-end sole residence with a value of more than NIS 20 million will not be entitled to the tax benefit.
Overall, the new amendment provides further tax relief for new immigrants buying a first home costing between NIS 2 million and NIS 6 million, but scraps the tax discount on the purchase of additional real estate assets.
Commenting on the move, Finance Minister Bezalel Smotrich said that especially during the current challenging period of the months-long war with the Hamas terror group, “we as a country need to do everything possible to make it easier for new immigrants from around the world who are returning home.”
Israel has been preparing for what it says will be a surge in Jewish immigration, or aliyah, as antisemitism has been on the rise around the world since October 7, when thousands of Hamas-led terrorists stormed southern Israel to kill nearly 1,200 people and take 251 hostages, sparking the war in Gaza. Between January and May 2024, over 11,000 new immigrants have come to Israel under the Law of Return, which allows Jews and their families to become citizens.
“This is a huge opportunity. We see many families who want to immigrate to Israel against the background of the rise of antisemitism,” said Aliyah and Integration director-general Avichai Kahane.
Previously new immigrants paid a purchase tax of 0.5% on the first NIS 1.98 million and 5% on the remainder of the value of the property, when buying a property either as a first home or as an additional real estate asset for investment.
Meanwhile, Israeli first-time homebuyers are exempt from paying the tax on the first NIS 1.98 million of the purchase price and are taxed at a standard rate of 3.5% for the next NIS 370,000, about 5% on the rest up to NIS 6 million, 8% above NIS 6 million, and 10% on any amount above NIS 20 million.
During the discussions at the Knesset Finance Committee, data was presented that showed that the vast majority of new immigrants forgo the purchase tax benefit when buying a first home at a purchase price of up to NIS 6 million and instead choose to be taxed at the financially more viable standard tax rates for Israeli residents. In 2023, only 66 new immigrants out of tens of thousands used the benefit.
Following the amendment, a new immigrant buying a sole property for residential use costing NIS 4.1 million will pay a discounted rate of about NIS 10,000 in purchase tax compared to about NIS 100,000 that an Israeli would pay. For a sole apartment with a purchase price of NIS 5.6 million, a new immigrant will pay about NIS 20,000 in tax compared to about NIS 200,000 that Israelis would be charged.
With the new amendment, immigrants will no longer be entitled to a purchase tax discount when buying a second or multiple properties, and will need to pay the standard tax rates applicable for all Israeli citizens.
The government said that until now a “significant” tax break was created for new immigrants who purchased an additional property, which goes against the government’s policy of increasing the tax burden on real estate investors to bring down high housing prices.
