If you own an apartment in Israel and rent it out, the short answer is: yes, the income is taxable, but Israel's system for landlords is more generous and straightforward than most people expect.
The three tax tracks
Each tax year, you choose one of three ways to be taxed on your rental income. You're not locked in. You can pick whichever works best for your situation.
- The exemption track. If your monthly rent is under about ₪5,650, you pay no tax on it at all, and in most cases you don't even need to report it. If your rent is a bit higher, between roughly ₪5,650 and ₪11,300 a month, you get a partial exemption, and only the amount above the threshold is taxed. This is the track most people renting out a single Carmei Gat apartment end up on.
- The flat 10% track. You pay a flat 10% on the full rent, with no deductions of any kind. No threshold, no paperwork about expenses. It's simple, and it can make sense if your rent is well above the exemption range.
- Your regular tax rate, with deductions. You pay your normal personal tax rate, but only on the profit, meaning rent minus real expenses like management fees, repairs, mortgage interest, and depreciation. This is worth it if your expenses are high, but it requires filing and keeping records.
A simple example
Say you rent an apartment for ₪4,500 a month. That's under the ₪5,650 exemption threshold, so under track one, you'd pay no tax on it at all.
If you rented that same apartment for ₪8,000 a month, you'd be in the partial exemption range. Only the portion of the rent above the threshold gets taxed, not all of it.
Who this doesn't apply to
This system is built for individual landlords renting a residential apartment to an individual tenant on a normal lease. It doesn't apply to:
- Commercial rentals
- Short-term or Airbnb-style rentals
- Renting to a business rather than an individual
Those are taxed at regular marginal rates regardless of the amount. Also, if you own more than about 10 rental units, the tax authority treats it as a business, which is a different set of rules entirely. Most landlords will never get near this.
One important note
This is general information to help you understand the system, not personal tax advice. The exact numbers are adjusted most years, and your best track can depend on your full financial picture. Before you file or choose a track, talk it through with a licensed Israeli accountant or lawyer. If you don't have one, contact me and I'll make an introduction.