Betterment Levy 2026 – What It Is and When to Pay

Many property owners confuse "capital gains tax" with "betterment levy" — two taxes that sound similar but are completely different in nature, in the authority that collects them, and in the conditions that apply to them. This confusion can sometimes cost a lot of money, so it is important to understand the difference before any transaction related to building rights.

Capital gains tax is a national tax collected by the tax authority on the profit from the sale of a property. The betterment levy, on the other hand, is a local payment collected by the local planning and building committee, on the increase in land value resulting from a planning change — even if you haven't sold anything.

What Causes the Betterment Levy?

Approval of a new city building plan (TAMA): allowing additional building rights, a change of use (for example, from agricultural land to residential), or increased density.
Granting an exemption: approval to build beyond the limitations of the existing TAMA — for example, increasing building percentages or adding a floor.
Permit for a different use: approval to use the property for a purpose different from the original designation (for example, converting a residential apartment into an office).

How to Calculate the Levy

The levy is calculated at a rate of 50% of the increase in the value of the real estate resulting from the betterment. An appraiser from the local committee assesses the value of the property before and after the betterment, and the difference is the basis for the calculation. For example: if the value of the land increased by 400,000 ₪ following the approval of a new plan, the levy will amount to 200,000 ₪.

When Do You Actually Pay?

Unlike capital gains tax, which is paid immediately upon sale, the betterment levy is paid only upon the "realization" of the right — usually when the property is actually sold, or when a building permit is issued that realizes the new building rights. This means that you can "accumulate" the levy obligation years before actually paying it.

Possibility of Appeal on the Assessment

The betterment levy assessment from the local committee can be appealed — in many cases, a private appraiser can examine the assessment and submit an objection, often significantly reducing the required amount. It is not advisable to take the initial assessment for granted.

Exemptions and Reductions from the Betterment Levy

Single residential apartment: subject to conditions and up to a certain area, an exemption can be obtained when selling a single residential apartment.
Betterment due to public construction: betterment resulting from a public plan (road, park) may be exempt.
Pinui-Binui and TAMA 38: significant exemptions and reductions are provided to encourage urban renewal.

A Common Mistake to Avoid

A common mistake is forgetting to check for accumulated betterment levy obligations on a property before purchasing it — if the previous seller did not realize approved building rights, the obligation may "awaken" for the new owner when they want to realize them. It is always advisable to check with the land registry and the local committee whether there are pending betterment levy obligations before signing.

How It Affects Future Sale Planning

If you plan to realize building rights (adding a floor, expansion) before a future sale, it is advisable to carefully plan the timing — realizing the rights before the sale can increase the value of the property but also trigger the levy obligation at that moment, rather than deferring it to the time of the sale itself.

Frequently Asked Questions

Do you have to pay both the betterment levy and capital gains tax on the same transaction?
Yes — two separate taxes, for different authorities (state vs. local), that can apply together in the same sale.

Who pays the levy — the buyer or the seller?
Usually the seller, but this is a matter of agreement between the parties and sometimes determined differently in the sale contract.

Can a buyer of a property "inherit" a betterment levy obligation that was accumulated earlier?
Yes — if the betterment was approved before the purchase but not yet realized, the obligation transfers with the property and applies to whoever realizes the right in practice.

Considering Buying or Selling a Property?

View properties for sale in Ma'ale Adumim and Jerusalem, and contact the Merkaz HaNekasim team for personal advice.