Introduction:

Parents of a child who is entitled to a Children's Disability Benefit are entitled to a reduced purchase tax of 0.5% of the value of the property, when purchasing a home in which the child will live
Someone who is entitled to the maximum Children's Disability Benefit rate (188%) or someone who has permanent medical disability of 100% (or a 90% weighted medical disability) are no longer required to go through an additional medical committee (as they were in the past). In all other case they must contact the medical committee
When purchasing a single residence, valued up to NIS 2,500,000 (as of 2019), there is a tax exemption on the first payment bracket.
For more information, see Regulation 11 of the Property Tax Regulations (Improvement and Acquisitions) (Purchase Tax)

Parents of a child who is entitled to a Children's Disability Benefit are entitled to a reduced purchase tax in accordance with the conditions detailed below.

  • Those who buy a piece of land to build on, are eligible to pay a reduced income tax of 0.5% on the part of the land that the house they will live in will be built on (regular income tax is paid on the rest of the property) and on the condition that the house is built within 2 years.
Attention
Establishing medical disability for children
Beginning September 2019, in addition to determining eligibility for a Children's Disability Benefit, the National Insurance Institute will also determine the child's degree of disability.
  • Established permanent medical disability of certain degrees comes with eligibility to the following benefits from the Tax Authority:
  • Previously in additional to the medical committee that determines eligibility for a disabled child benefit, the child would have to appear before an additional medical committee to determine eligibility for tax benefits.
  • Currently, the committee that determines eligibility for the disabled child benefit, also determines the level of disability.
  • The National Insurance Institute automatically sends information to the Tax Authority regarding children who receive a disabled child benefit of 188% and in additional cases detailed on the National Insurance Institute website.
  • In these cases if you apply for a tax benefit you don't have to go through and additional medical committee and don't even have to submit documentation regarding the level of disability.
  • In all other cases you can submit a request to the National Insurance Institute to have the medical committee determine the degree of disability through a quick process and through medical documents only.

Benefit Rate

Benefit Rate in Purchase of a Single Home worth up to NIS 2,500,000

  • For the purchase of a single home worth up to NIS 2,500,000 made from 6.12.2016 and onward (see the definition below), there is a tax exemption on the first payment bracket:
  • On the part worth up to NIS 1,696,750, one will not pay purchase tax from 16.01.2019 until 15.01.2020 (up to NIS 1,664,520 in the previous year).
  • On the remaining amount of the worth of the house (up to NIS 2,500,000), one must pay 0.5% of the value of that part.

Benefit Rates in the Remainder of Cases

  • When purchasing a home that is not defined as a single home, or is a single home worth over NIS 2,500,000, and for a purchase of a single home worth less than NIS 2,500,000 that was made before 6.12.2016, the benefit is to pay a reduced purchase tax of 0.5% on the value of the home.

Definition of a Single Home

  • A single home is defined as the only home of an Israel resident, including someone who became an Israeli resident or a returning resident within two years of purchasing the home.
  • The buyer of the home, his/her spouse that lives with him/her and his/her children (unmarried) up to age 18, are considered a single buyer for this purpose.
  • The home is considered a single home even if the buyer owns another home that was rented to people through a protected rental before 01.01.1997 or an additional home that the buyer owns less than a third off, and if it was a home that was inherited the buyer can own up to a half.

Home Improvements

  • If the purchases owns an additional home to the one he/she is currently buying, and sells the previous months within 18 months of purchasing the new home, or within a year of receiving the new home if it was bought from a contractor - than he/she is considered the owner of a single home in the context of tax calculations (when the additional apartment is sold it must be reported right away to the local offices).
  • The tax amounts for a single home will be used also in the purchase of an "alternate home" if the purchaser meets all of the following conditions:
    • He/she has 2 apartments simultaneously in his/her possession and he/she sold one of them with a tax exemption.
    • Within 12 months of selling the first home he/she sold the second home with a tax exemption in accordance with section 49 of the Property Tax Law (Purchase and Appreciation).
    • The combined value of both of the homes does not exceed NIS 2,020,000 (right as of 01.01.2019-31.12.2019).
    • In the year before or after the sale of the second home, he/she purchased a third home ("alternate home") for a cost of at least 3/4 of the combined value of the 2 previous homes.

Someone who purchases a home through a purchase group

  • Someone who previously purchased a home through a purchase group and it was his only home is considered to be a single home owner if he meets one of the following conditions:
  1. The current (additional) home was purchased 6.5 years after he purchased a home with a purchase group and he still has not actually been given possession of the home by the buyer.
  2. The current home was purchased 4 years after the home with a group purchase and all of the following conditions apply:
    • The current home was purchase after 25.06.2018.
    • Construction has not started on the home purchased with the group (infrastructure and land preparation are not considered construction), or construction has started but the Tax Authority has put a significant delay on its completion.
    • The buyer is not in control of the delays in construction beginning or being completed and he was unaware of such delays when he purchased the home through the purchase group.
  • The buyer is considered to be a single home owner in the above two cases if he sells the home purchased with the purchase group within 18 months from when it is finished being built and the home he bought now is his only other home aside from the one bought with the purchase group.
Tip
Someone who meets these criteria is also considered a single home owner in application of other benefits given by other laws (for example work allowance, income existence benefit and various rights from the National Insurance Institute), during the time between the purchase of the current home and sale of the home bought as part of a group purchase (on condition that the sale is made within 18 months from when construction is completed).


Who is eligible?

  • Parents who are purchasing a home that the child will live in and whose child is entitled to the maximum Children's Disability Benefit rate (188%) or someone who has permanent medical disability of 100% (or a 90% weighted medical disability).

How to claim it?

Medical committee for a child that does not yet have an established disability that entitles a discount

  • If child's established disability rate is lower than the required rate for receiving the discount, a request must be submitted to the medical committee to determine the child's medical disability rate.
  • The degree of medical disability can be established based on medical documents that were submitted with the request.
  • For additional information on submitting a request to the committee, see medical committee for a purchase tax discount.

Submitting a request to the Tax Authority

  • Applicants must write a letter detailing the request of the family's need to move to a residence which is suitable for the child's needs.
  • Fill out a Partial Exemption from Purchase Tax Request Form and a Declaration Form for Purchase of Real Estate.
  • The Tax Authority will automatically receive information from the National Insurance Institute regarding children who have an established degree of disability that entitles them to a discount so that the child will not have to go through an additional medical committee and will not have to attach documents.
  • The letter and documents should be sent by mail or fax to the "Lands Taxes Authority"- Central Bureau.
    • Address: Kanfei Nesharim 5, PO Box 1170, Jerusalem 91010
    • Fax: 02-6559404
  • The Help centers, services and resources of the tax authority can be consulted for assistance.

Receiving approval from the Family Court

  • After submitting the request, families who children are entitled to a benefit of 188% or for whom the medical committee established 100% disability/90% weighted disability, will be directed to the Family Court to confirm eligibility for the exemption.
  • The parents must go to court as the minor's legal guardians with a request for declaratory relief in order to receive the authorization to make use of the benefit to which they are entitled.
  • The Guardian General will respond to the request with the minor’s best interest in mind.
  • The discount will be given after obtaining a judgment approving the application.

Residence registered under the child's name

  • If parents want to transfer the rights to the residence from the child to another person in the future, approval from Family Court will be required.
  • When the child reaches the age of 18, as long as he/she has no appointed guardian, the child may do as he/she pleases with the property.
  • In accordance with the Ministry of Construction's “Unavailability” (ee-zminut) procedure, the child will not lose his/her rights related to acquiring a residence in the future, but only if the home purchased in the child’s name is the only home owned by the parents, and they live there.
  • It would be enough that parents inherit a small part of another residence to disqualify the child from entitlement to benefits granted by the Ministry of Construction for people with disabilities (such as obtaining a mortgage on special terms or rental assistance). Also, it is not known if or for how long the "Unavailability" (ee-zminut) procedure will remain in force.

Receiving a retroactive discount

  • Parents who have already paid a purchase tax, and meet the criteria regarding real estate tax laws, and receive the proper approvals from the National Insurance Institute and the Court, as detailed above, may request exemption for up to 4 years retroactively.

Please note

  • A purchase tax refund may only be received twice in a person's lifetime, and therefore, if the parents make use of the child's right, he/she would have only one opportunity to use the discount in the future.
  • There is no need to register the residence under the child's name.

Income tax refund for someone who paid more than necessary

  • The tax authority operates an application that allows those who have previously made a real estate transaction to check whether there is a balance in their favor, for over payment of an appreciation tax or purchase tax.
  • If a credit balance exists, a refund can be obtained by filling in the details in the application.
  • For additional information see Tax refund for over payment of appreciation tax or purchase tax.

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