Tax on rental income in israel

Rental income in Israel is considered taxable income and must be reported to the Israel Tax Authority, even when the landlord owns only 1 apartment. Israeli law offers 3 distinct taxation tracks and each carries different financial implications. Choosing the correct track is critical because the wrong selection may lead to unnecessary tax payments, denial of exemptions or retroactive assessments. Landlords must understand that rental income is not viewed as “private money” but as official taxable income that requires accurate reporting and compliance with strict statutory deadlines.

Israel’s rental tax system includes a partial exemption track up to 5654 NIS per month in 2025, a ten percent flat tax track with no expense deductions, and the regular income tax track which allows broad deduction of recognized expenses such as maintenance, mortgage interest, repairs, insurance, depreciation and management fees. Each track fits a different landlord profile. For example, the exemption track benefits those with low rental income, the ten percent track suits owners with high rent and minimal expenses, and the regular income track benefits landlords with many deductible costs. Selecting the wrong track or failing to plan tax strategy in advance can significantly reduce net rental profit.

Professional legal guidance is essential because the Israel Tax Authority closely monitors rental income and often imposes penalties for inaccurate reporting, late declarations or misclassification of rental activity. Some landlords may even be considered as operating a rental “business” which triggers additional obligations such as bookkeeping and National Insurance payments. Adv Yohan Sisse Law Office provides comprehensive legal and tax support for landlords including selection of the optimal tax track, preparation of all required filings, deduction analysis and full coordination with the Israel Tax Authority. The firm ensures that landlords pay only what the law requires and remain fully protected throughout the rental period.