Tax on Rental Income in Israel - Exemption, 10% Track, and Brackets
A residential landlord in Israel has three ways to be taxed on rent: full exemption up to a monthly ceiling, a reduced 10% flat rate on gross income with no deductions, or regular marginal brackets with expense and depreciation deductions. You pick one track per tax year, and the right choice depends on the rent level and your total income.
What is the exemption ceiling and how it erodes
Under the exemption track, if total monthly rent does not exceed the exemption ceiling, there is no tax at all. The ceiling is updated yearly by the Tax Authority, and for 2026 it is ₪5,654 per month.
If rent is above ₪5,654 but below ₪11,308 per month, the exemption erodes by a formula: subtract from the ceiling the gap between actual rent and the ceiling, and the remainder stays exempt. From ₪11,308 per month upward there is no exemption on this track and the entire income is taxable.
Note: the ceiling is tested across all residential apartments you rent out together, not per apartment.
When the 10% track makes sense
The 10% track applies a flat 10% tax to gross rent with no deductions, depreciation, or offsets. It suits cases where income exceeds the ceiling and there are no significant deductible expenses.
Basic condition: the income is from renting a residential apartment in Israel and is not "business income". By law the tax is due within 30 days of the end of the tax year, and the Tax Authority's practical guidance is to pay by 31 January of the following year, unless you paid advances during the year.
When regular brackets are better
On the brackets track the income joins your other income and is taxed at your personal marginal rates, but you may deduct ongoing expenses (repairs, agent fees, mortgage interest on the rented flat) and depreciation. It pays off when expenses are high relative to rent.
Choosing this track for a rented property can affect capital-gains tax when you later sell, since deducted depreciation reduces the original cost basis. Consult an accountant before deciding.
How this ties to the contract
The tax is solely the landlord's responsibility, not the tenant's, though contracts often state that rent is "net" to the landlord and any tax is on them. Our tool generates a standard lease; the tax-track decision is handled with the Tax Authority separately from the contract.
Frequently asked questions
What is the rental income tax exemption ceiling in Israel?
For 2026 the exemption ceiling is ₪5,654 per month - if total rent does not exceed the ceiling there is no tax. Between ₪5,654 and ₪11,308 a partial exemption applies, and from ₪11,308 upward there is no exemption on this track.
How much tax do you pay on the 10% track?
The 10% track applies a flat 10% tax on gross rent with no deductions or depreciation. The practical guidance is to pay the tax by 31 January of the year following the tax year.
Who pays the tax - landlord or tenant?
Tax on rental income is the landlord's responsibility only. The tenant is not liable for it, even if the contract defines rent as "net" to the landlord.