Exemption/Reduction of Purchase Tax on Apartment Gifts Between Relatives 2026

Transferring an apartment as a gift between relatives is a common transaction in Israel — but contrary to popular belief, it is not completely exempt from purchase tax. Here’s what really happens in terms of tax.

The Basic Principle: Relief, Not Full Exemption

A gift of an apartment to a "relative" (as defined in the Real Estate Taxation Law) usually qualifies for a significant purchase tax reduction — typically a reduced tax rate of one-third of the regular tax brackets — but not an automatic full exemption. It is important to understand the difference: this is a discount on the liability, not a cancellation of it.

Who is Considered a "Relative" for the Purpose of the Relief?

• Spouse, parents, children, grandchildren.
• Siblings (under certain conditions).
• Spouses of children (son-in-law/daughter-in-law) — according to specific conditions.
• Parents of parents (grandparents) and their descendants, according to the precise definitions in the law.

It is important to note that uncles, cousins, and more distant relatives are not included in the relief definition — a transfer to them will usually be considered a regular transaction subject to the full purchase tax, even if there is no actual monetary consideration.

The precise definition of "relative" in the Real Estate Taxation Law is relatively strict, and not every family member is automatically included — it is highly recommended to check the exact status with a real estate tax attorney before making the transfer.

How is the Value of the Gift Transaction Calculated?

Even when there is no actual payment, the tax authority requires a self-assessment of the apartment's value (usually based on market value) for tax calculation purposes — it is not possible to "declare" a low value arbitrarily to reduce tax liability. The tax authority compares the declared value to similar transactions recently recorded in the area, and if the value appears significantly lower than market value, it may determine a higher assessment on its own initiative.

What About Capital Gains Tax on the Transferor?

The transferor (the giver of the gift) may be liable for capital gains tax on the appreciation of the property, subject to the usual exemptions applicable to the sale/transfer of a single residential apartment — that is, both sides of the transaction must be examined separately: purchase tax on the recipient, and capital gains tax on the transferor. In many cases, if the transferor meets the exemption conditions for a single apartment (including the required holding period), they will be exempt from capital gains tax on the transfer, even without actual monetary consideration.

Numerical Example

Suppose a parent transfers a gift of an apartment valued at 1,500,000 ₪ to their child. If the child is considered a "relative" and this is their only apartment, the purchase tax will be calculated based on one-third of the regular tax brackets on this value — a significantly lower amount than the purchase tax on an identical transaction between strangers, but still not necessarily zero, depending on the relevant brackets.

What Happens if the Gifted Apartment is Sold Too Quickly?

A quick sale of an apartment received as a gift may trigger a more thorough examination by the tax authority, and sometimes affects eligibility for future exemptions (for example, if the recipient sells the apartment and immediately purchases another one) — it is advisable to consult with a tax attorney before such a sale. Additionally, the holding period for future capital gains tax exemption may be counted from the date of receiving the gift, not from the original purchase date of the transferor — a detail that can significantly impact future sale planning.

Combining a Gift with a Partial Loan — A Common Structure

Not always is the transfer a full gift — sometimes families combine a partial gift with an actual sale (for example, parents "sell" the apartment to the child for a symbolic amount or at a significant discount, which constitutes a combination of gift and sale). Such a structure requires particularly careful examination by the tax authority, and it is highly recommended to have close legal guidance for proper transaction planning.

Frequently Asked Questions

Do you have to pay anything for a gift between spouses?
Transfers between spouses usually enjoy significant reliefs and even full exemption in certain cases — the exact conditions depend on the specific circumstances.

Can you transfer only part of the apartment as a gift?
Yes — you can transfer a certain percentage of ownership (for example, half), and the tax will be calculated relative to the value of the transferred portion.

Does the recipient need to report the gift to the income tax authorities?
Gifts between relatives are not subject to income tax in Israel, but a purchase tax declaration must be submitted to the tax authority within 60 days of the transfer.

What happens if the recipient already owns another apartment?
In that case, it will not be considered a "single apartment" for the purpose of the brackets, which may increase tax liability even under the relatives' relief.

Related

For more information, see the guide to Exemption from Purchase Tax on a Single Apartment.