Who Can Receive an Apartment as a Gift Without Capital Gains Tax?
Section 62 of the Land Taxation Law precisely defines which relatives are eligible for capital gains tax exemption on a no-consideration transfer. The list includes: spouse (married or common-law partner), parent and child (including stepchildren), and grandparent and grandchild. This is a closed list — anyone not on it pays full capital gains tax.
Amendment 76 to the law in 2023 made a significant change: siblings were removed from the definition of 'relative' for Section 62 purposes. This means transferring an apartment to a brother or sister requires full purchase tax and may also trigger capital gains tax liability.
When we work with clients in Bik'at Ono and Kiryat Ono, we frequently encounter families wanting to transfer property to the next generation — parents to children, grandparents to grandchildren. This is exactly the scenario Section 62 was designed for, and proper planning can save tens of thousands of shekels.
It is important to verify the family relationship and confirm with a notary before starting the process — this shortens timelines and prevents unnecessary mistakes.
- Spouse (married or common-law) — eligible for full capital gains exemption and one-third purchase tax
- Parent and child (any age) — whether the child is 25 or 55, they pay only one-third of purchase tax
- Grandparent and grandchild — full generation forward, one-third purchase tax only
- Siblings — not eligible for exemption since Amendment 76; full tax applies
- Cousins and distant relatives — no Section 62 benefit, full purchase tax and capital gains tax
The One-Third Rule — How Much Will You Actually Pay in Purchase Tax?
The one-third rule is one of the most significant benefits in the Land Taxation Law. Instead of paying full purchase tax, a recognized relative pays only one-third of the tax. This is fixed in law, not subject to the tax assessor's discretion — the rule is built into the tax table itself.
In 2026, if an apartment valued at 4,000,000 NIS is transferred as a gift, the recipient will not pay capital gains tax (assuming they are a recognized relative), but will pay one-third of the purchase tax. For an apartment at this value, standard purchase tax would be approximately 240,000 NIS. With the one-third rule, the amount drops to approximately 80,000 NIS — a saving of 160,000 NIS.
If you own property in Bik'at Ono or Kiryat Ono, this difference is real and significant. In recent years we have seen notable price increases in neighborhoods like central Kiryat Ono, Pisgat Ono, and in new development projects in the area — meaning the benefit of the one-third rule continues to grow.
It is important to remember that the one-third applies only to purchase tax, not to all expenses. You will still need to pay attorney fees, Tabu fees, and inspection costs — additional expenses that should be budgeted in advance.
- One-third of purchase tax applies to every recognized relative under Section 62
- If standard purchase tax would be 240,000 NIS, you pay only 80,000 NIS — savings of 160,000 NIS
- The one-third is fixed in law, not discretionary — complete certainty
- The rule applies even if the apartment doubled in value since original purchase
- Tabu processing reflects the one-third rule; no additional calculation needed
2026 Purchase Tax Rates — Exact Table for Single Apartment
In 2026, the purchase tax brackets for a single apartment are: up to 1,978,745 NIS — full exemption (0%), from 1,978,745 to 2,347,040 NIS — 3.5%, from 2,347,040 to 6,055,070 NIS — 5%, from 6,055,070 to 20,183,565 NIS — 8%, and above 20,183,565 NIS — 10%. The brackets are updated annually, so check the Tax Authority website for any changes.
When the recipient is a recognized relative, you calculate the standard tax and divide by three. For example: an apartment valued at 3,000,000 NIS falls in the 5% bracket (2,347,040 to 6,055,070). Standard purchase tax would be approximately 38,000 NIS (partially at 3.5% and partially at 5%). With the one-third rule, the amount drops to approximately 12,700 NIS.
In Bik'at Ono, apartment prices generally range between 2,500,000 and 8,000,000 NIS, depending on neighborhood and size. This means most gift transfers in our area will fall in the 5% or 8% brackets, with the one-third rule applied.
If you are considering a transfer, calculate the taxes now and get a precise estimate from an attorney. We know attorneys with extensive experience in Bik'at Ono, and Shmuel would be happy to connect you.
- Up to 1,978,745 NIS — full exemption (0%)
- 1,978,745-2,347,040 NIS — 3.5% (at one-third: 1.17%)
- 2,347,040-6,055,070 NIS — 5% (at one-third: 1.67%)
- 6,055,070-20,183,565 NIS — 8% (at one-third: 2.67%)
- Above 20,183,565 NIS — 10% (at one-third: 3.33%)
- Rates are current for 2026 and update at the beginning of each year — always verify with the Tax Authority
Cooling-Off Period: When Can the Recipient Safely Sell?
The cooling-off period is one of the most critical but often overlooked factors. The new owner (gift recipient) must hold the property for a minimum period to preserve tax benefits. If they live in the apartment — 3 years. If they do not live in it — 4 years. Selling before this time can trigger significant capital gains tax liability, despite it being a gift.
We encounter this in Bik'at Ono regularly: parents transfer an apartment to a child, the child sells it after a year and a half because they are moving abroad. The original attorney did not mention the cooling-off period, and the child discovers they owe substantial capital gains tax. This is a situation that is very uncomfortable to see.
This is why we always recommend thinking ahead: when transferring an apartment, discuss future scenarios. If there is a reasonable chance the recipient will sell within 3-4 years, a gift transfer may not be the best option. Perhaps a family loan or a commercial sale is preferable.
The bottom line: the recipient should commit to long-term ownership. If they sell before the required period, the Tax Authority will ask questions and may impose an assessment.
- 3 years — cooling-off period if recipient lives in the apartment
- 4 years — cooling-off period if recipient does not live in the apartment
- Sale before the required period can trigger significant capital gains tax
- Cooling-off period starts from the date of Tabu registration, not from document signing
- If the recipient is likely to sell early — consult an attorney or tax advisor before the transfer
Linear Benefit for Properties Purchased Before 2014
Properties purchased before January 1, 2014, have a linear benefit on capital gains tax — a concession granted by the state. The benefit is phased out gradually through 2030, meaning part of the profit is tax-exempt based on the year of purchase.
This topic is especially relevant in gift transfer scenarios in Bik'at Ono, because there are many apartments here purchased in the 2000s and early 2010s that have appreciated significantly. When such an apartment is transferred to a child or parent, the recipient inherits the original purchase date and the right to the linear benefit.
Between 2023 and 2026, the benefit decreases each year. By 2030, it will disappear entirely. If such a property is transferred now, the benefit is still at significant strength. If done in five years, the benefit will be roughly half its current value.
We recommend obtaining a professional tax opinion to evaluate the precise value of the benefit for your specific property. The result may dramatically influence the decision of whether to transfer now or wait.
- Properties purchased before 1.1.2014 enjoy a linear capital gains tax benefit
- The benefit phases to zero by 31.12.2030
- The gift recipient inherits the original purchase date and benefit entitlement
- In 2026, the benefit remains at full or near-full strength
- Consult a tax advisor before transfer to evaluate the benefit value in shekels
Additional Costs: Attorney, Inspections, and Land Registry
Transferring an apartment as a gift is not free, even with tax benefits. You will need to pay attorney fees, legal inspections of the property, Tabu registration, and insurance. Typically, attorney fees for a transfer are 0.5%-1% of the property value, plus VAT. For an apartment valued at 4,000,000 NIS, that means 20,000 to 40,000 NIS for the attorney alone.
The Tabu fee is lower, typically about 0.1%-0.15% of property value. Check directly with the Land Registry or your attorney. Legal inspections — ownership verification, debts, zoning updates — may add several thousand more shekels.
In Bik'at Ono, we recommend working with attorneys who know the neighborhoods and recurring issues: accumulated building committee debts, nearby urban renewal plans, prior mortgages. This is not just routine verification — it is verification grounded in local knowledge.
Do not try to save on an attorney when transferring property as a gift. One mistake — incorrect Tabu entry, unresolved co-ownership, unclear future rights — can cost tens of thousands of shekels down the road.
- Attorney fees: 0.5%-1% of property value plus VAT
- Tabu fee: typically 0.1%-0.15% of property value
- Legal inspections (rights, debts, zoning): several thousand shekels
- Insurance (title, tenant liability): up to several thousand shekels
- An experienced local attorney is essential — do not cut corners here