Supplementary Tax on Second Apartment 2026 – What It Is and Who Is Obligated

In addition to the regular capital gains tax, sellers of a second apartment (or any property that is not a "single apartment" exempt from tax) may be liable for an additional "supplementary tax" — a tax that many are unaware of until they encounter an assessment. Here’s how it works in practice in 2026.

What Is Supplementary Tax?

Supplementary tax is an additional tax on "high incomes," according to Section 121b of the Income Tax Ordinance. It is not unique to real estate — it applies to the taxpayer's total annual income, including capital income such as gains from the sale of property. When the total annual income (including the gain from the sale) exceeds the threshold, an additional tax rate is applied to the portion that exceeds the limit.

Amounts and Rates in 2026

• General Annual Income Threshold: Above 721,560 ₪ — an additional tax of 3% on every shekel above the threshold.
• Capital Income (including real estate gains): Above 1,100,000 ₪ — an additional 2%, so the total addition on high capital income can reach 5% beyond the regular capital gains tax.
• Specific Adjustment Threshold for Selling a Residential Apartment (Section 121b(e)): 5,385,285 ₪ for the year 2026 — this is a separate and specific sales value threshold for residential apartments, above which supplementary tax may apply to a real estate transaction even if it is a "luxury apartment" that is generally entitled to partial exemption.

It is important to distinguish: this is a different threshold from the "exemption threshold for luxury apartments" (5,008,000 ₪) that appears in the calculation of the regular capital gains tax — these are two separate mechanisms in the law, not the same number. It is advisable not to confuse them when planning a transaction.

Who Does It Actually Apply To?

Supplementary tax is primarily relevant to:

• Sellers of a second apartment/investment apartment — who are not entitled to full exemption from capital gains tax, and therefore their gain is included in the calculation of annual capital income.
• Individuals with high annual income from other sources (salary, business, rent) to which the gain from the sale is added.
• Sellers of luxury apartments valued close to the adjustment threshold (5,385,285 ₪) or above — even if it is a single apartment.

Those selling a "regular" single apartment valued below these thresholds — in most cases will not be exposed to supplementary tax at all.

Example for Illustration

An investor selling a second apartment in Ma'ale Adumim with a profit (gain) of 900,000 ₪, with no additional capital income in that year — will not exceed the 1,100,000 ₪ threshold and will not be liable for supplementary tax on this transaction. But if that investor sells another apartment in the same year, or has additional capital gains from the stock market, the accumulated gain may exceed the threshold and add up to 5% tax.

Planning Ahead Saves Money

Since supplementary tax is calculated on the total annual income, sometimes the timing of the sale matters (e.g., splitting between tax years) — such planning requires the guidance of an accountant or real estate tax attorney before signing, not after.

Selling a Second Apartment in Ma'ale Adumim or Jerusalem?

Before setting a sale price, it is important to understand the full exposure to tax — regular capital gains tax, possible supplementary tax, and relevant luxury thresholds. See also the full guide to Capital Gains Tax 2026. View similar properties in Ma'ale Adumim and Jerusalem, and contact our tax experts for an accurate calculation before you sell.