Selling a home, farm or piece of land in the moshavim and community settlements of the Jezreel Valley is a big decision. While the demand for housing in our area, such as Kfar Yehoshua, Nahalal or Zippori, remains high thanks to the quality of life and green spaces, the process itself carries significant financial challenges. Many property owners who enter the sales process are surprised to discover that a significant portion of their profit may disappear in favor of heavy tax payments, especially in light of the new laws that went into effect in 2026.
The most common confusion among sellers is the lack of understanding of the differences between the two main taxes that apply to real estate transactions: Appreciation tax andImprovement levyAlthough the names are similar, these are two completely different payments, paid to different entities, and calculated in different ways. Lack of knowledge on this subject could lead to an unnecessary payment of hundreds of thousands of shekels. The following guide will clear up the concepts for you, explain exactly what you are paying for, and give you practical and legal advice for reducing costs.
What is appreciation tax and how is it calculated?
Capital gains tax is actually a capital gains tax on real estate. When a person sells real estate for a higher price than the price at which he bought it, the state demands its share of the profit. The tax is paid directly to the Tax Authority (Income Tax / Real Estate Taxation) of the State of Israel. It is important to understand that the capital gains tax is not imposed on the entire sale amount of the house, but only on the "capital gains" - that is, on the net difference between the purchase cost in the past and the current sale cost. The standard tax rate is 25% of the profit.
For those who sell their only residential apartment, the law (Section 49B(2) of the Real Estate Taxation Law) generally allows for a full exemption from capital gains tax. However, in rural areas, the picture becomes more complicated.
The 2026 Trap: The End of Linear Calculation
Until the end of 2025, many property sellers enjoyed a huge tax break called the “better linear calculation.” This meant that any profit the property accrued from the historic purchase date until January 1, 2014, was completely tax-free. Families who bought a home in a community settlement or estate in the 1980s paid a very small capital gains tax, only on the relative profit accrued from 2014 onwards.
Starting January 1, 2026, the rules of the game have changed following a new government memorandum. The state has decided to gradually eliminate this benefit. Anyone who sells a property in 2026 and has a profit that was accumulated before 2014 will begin paying a tax on it at a rate of 5%. This tax will increase each year, until in 2030 the exemption is completely abolished and the seller will pay 25% tax on the entire profit, from day one.
| Year of sale of the property | The tax rate that will be imposed on the old profit (before 2014) |
| By the end of 2025 | 0% (full exemption) |
| Year 2026 | 5% |
| Year 2027 | 10% |
| Year 2028 | 15% |
| Year 2029 | 20% |
| 2030 and beyond | 25% (full tax) |
The economic significance is that any delay in the sale decision from 2026 onwards costs the property owners a great deal of money.
Capital gains tax on the sale of estates and farms in moshavim (the division rule)
Selling an agricultural estate in a moshav in the Jezreel Valley is in no way similar to selling a villa in the city. An estate consists of a residential house, large yard areas (plot A), agricultural areas and additional building rights that have not yet been utilized. The Tax Authority takes the sale of estates very seriously and does not grant an exemption from capital gains tax on the entire estate, even if it is your only home.
Recent court rulings, such as the recent precedent-setting decision in the "Avivi" case (Case No. 7562-09-23), state that a dual process of "physical separation" and "ideological separation" must be carried out.
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The physical split: The part that is actually used as a residential apartment is separated from the "reasonable area" around it (usually an area of up to one dunam), and the rest of the land. The exemption from the appreciation tax will be granted only on that reasonable area and the residential house. The rest of the area on the estate will be subject to a full appreciation tax of 25%.
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The conceptual split: Even within the area that received an exemption, they check to see if there are additional building rights that have not yet been used. If the value of these rights exceeds the exemption ceiling set by law, they are also taxed.
This work process requires the assistance of a professional real estate appraiser who pre-evaluates the exempt portion versus the taxable portion, in order to avoid painful surprises after signing the contract. In addition, the return of the property tax in 2026 at a rate of 1.5% on vacant land in estates requires estate owners to carefully examine the feasibility of holding the empty areas.
What is the improvement levy? (The silent payment to the local committee)
While the improvement tax checks how much you bought and how much you sold, the improvement levy operates according to a completely different logic and is paid to a different body – the local planning and building committee of the Emek Jezreel Regional Council. In 2026, the regional council's budget was approved for a total of approximately 539 million shekels, with part of the councils' development budgets relying on the collection of these levies.
The improvement levy is paid when the regional council has approved a new plan (such as a city building plan - TBA) that has improved and increased the value of your land. For example: If in the past only one house of 160 square meters was allowed to be built on your plot, and the council has approved a new plan that allows the construction of two houses and the division of the plot, then your plot is now worth much more.
The law says that this improvement was created thanks to the action of the public authority, and therefore you are required to share the profit with it. The amount of the levy is 50% of the increase in value created solely as a result of the approval of the plan.
When do you actually have to pay the improvement levy? Even though the debt arose on the day the plan was approved by the committee, you don't have to pull out your wallet at that moment. The law states that you only pay on the day of "exercise of rights." Exercise occurs in one of two situations:
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When you apply for a building permit and want to actually build according to the new plan.
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When you sell the property. In this situation, the buyer is the one who will benefit from the building rights in the future, so on the day of the sale you must pay the debt. The local committee will not give you the taboo approval required to transfer ownership to the buyer until the improvement levy is paid in full.
| Points of comparison | Appreciation tax | Improvement levy |
| The body is tall. | Israel Tax Authority | Jezreel Valley Regional Council / Local Committee |
| Reason for charge | Profit generated when selling the asset (difference between purchase and sale) | Increase in land value as a result of approval of building plans by the council |
| Payment rate | Usually 25% of the real profit in the transaction | 50% of the value of the improvement determined by the committee's appraiser |
| Payment timing | After signing the sales contract | When selling the property or when receiving a building permit (realization) |
How to lower costs and pay real taxes: collecting and managing expenses
One of the most legal and effective ways to dramatically reduce your capital gains tax is to demand that the tax authority recognize all the expenses you have had on the property over the years. Section 39 of the Real Estate Taxation Law establishes a series of "allowable deductions" - amounts that can be offset from the profit to arrive at a true net profit. The more expenses you prove, the less taxable profit you will pay, and the less tax you will pay.
The biggest mistake sellers make in rural areas is losing documentation. People renovate, add pergolas, replace plumbing, and pay professionals, but don't keep receipts and invoices. On the day of the sale, without a neat receipt that lists the details of the property, the tax authority will not recognize the expense.
Below is a detailed list of the main expenses that are important to collect and document in preparation for calculating the capital gains tax in 2026 :
| Type of expense | Explanation and instructions for preservation |
| Broker fees | The brokerage fee you paid when buying the property, as well as when selling it (up to a ceiling of 2% plus VAT). Receipts from a licensed professional must be presented. |
| Construction and renovation work | Payments to contractors, surveyors, architects, and professionals who improved the property. Any renovation that increases the value of the home is allowed as a deduction. |
| Lawyers' and appraisers' fees | The payments you made to lawyers who accompanied the purchase and sale, and to a real estate appraiser who valued the property for you. |
| Improvement levy | The improvement levy itself that you pay to the local council is recognized as an expense that reduces the improvement tax. |
| Interest on the mortgage | The real interest expenses that you paid to the mortgage bank over the years on the loan to purchase the property are recognized, provided that they are attributed to the part of the residence that was not used for business. |
| Payments to the Israel Lands Authority (ILA) | Capitalization fees paid to the administration over the years for lease rights, especially in the estates. |
| Fees and purchase tax | The purchase tax you paid when buying the property, along with land registry registration fees and bank capitalization fees. |
How are expenses related to a farm with an agricultural portion treated? When claiming expenses in the sale of a farm, the Appeals Committee has established (in accordance with tax law) the "principle of proportionality." That is, recognized expenses will only be allowed in proportion to the taxable portion of the total transaction. It is not possible to load all the expenses for building a barn onto the exempt residential plot, and vice versa. Therefore, accurate recording of where each expense was directed is critical.
In addition, for people who operated a small business from part of the residence and claimed current depreciation expenses on it, the position of the professionals for 2026 states that deducting depreciation for a business in part of the apartment (which is smaller than 50% of its area) does not negate the total exemption from capital gains tax on the apartment as a residential apartment, but the "original price" of the property must be reduced by the amount of the deducted depreciation expenses.
Exemptions from the improvement levy – not always mandatory to pay
Before we proceed to pay the improvement levy that the Regional Council requires, it is important to know that the Planning and Building Law (Section 19) grants a series of exemptions, the most important of which concerns the expansion of existing residential apartments.
Exemption up to 140 square meters: If you have a small residential apartment and you are interested in expanding it, there is an exemption from the improvement levy on the construction addition, provided that the total area of the house after the expansion does not exceed 140 square meters. However, be aware of the trap: to receive and retain the exemption, you (or a relative) must live in the expanded property for at least four years from the date of completion of construction. If you sell the property before four years have passed, you will be required to pay the improvement levy retroactively.
If the council has issued you an improvement levy assessment that you think is too high, you have a legal right to submit a request for the appointment of a final assessor within 45 days of receiving the assessment, in order to review and reduce the demand.
Summary and recommendation for gold sellers in the valley
A real estate transaction in the Jezreel Valley in 2026 is not for amateurs. The combination of the forces of the cancellation of the linear calculation, the return of the property tax and the strictness of the planning committees and the appeal of estate divisions, requires every seller to prepare in advance. Don't wait for the moment when the buyer is sitting across from you in the law firm.
Start by compulsively collecting every receipt, invoice, capitalization fee, or fee you have ever paid in connection with the property. Prepare a neat "property binder." At the same time, don't go through this process alone - contact me. My name is Lior Zahavi from "Emek Nadlan," and as a local real estate expert who lives in the area and lives in Kfar Yehoshua, I know the moshavim and community settlements in Emek Jezreel by heart. Together we will plan your steps and connect you with the right professionals, such as a real estate appraiser and a tax lawyer, in preparation for the transaction. Early planning is the only difference between a profitable transaction and losing family capital to tax payments.
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