Planning an Exit Strategy for Israeli Property
Planning an Exit Strategy for Israeli Property
An exit strategy is not a prediction of when you will sell. It is a plan for how you would sell, pass on or otherwise leave an Israeli property, and what that would involve in both countries. For Americans, the questions include Israeli capital gains tax, the calculation of gain in dollars for US purposes, the conversion and transfer of proceeds, and the treatment of the property if it passes to heirs. Planning ahead lets you choose an ownership structure, keep the right records and time a sale thoughtfully. This guide outlines the main exit routes and the issues to raise early with your Israeli and American advisors.
Why Plan the Exit Early
Decisions made at purchase, such as whose name is on the title, whether a company holds the property and how the purchase is documented, shape the options available years later. Records of purchase costs, improvements and payments can affect the gain calculated in both countries.
Keeping a well-organized file from the first day is one of the most valuable exit preparations. Scan invoices for renovations, keep copies of each tax filing and store them in a place your heirs or advisors could find if needed. Years later, these papers can be surprisingly difficult to recover.
Selling on the Open Market
A standard sale involves choosing a broker, setting a price, negotiating with buyers, signing a contract and completing registration. The buyer's mortgage and legal checks can extend the timeline. Selling a tenanted apartment is possible, but the lease terms and the tenant's cooperation with viewings matter. Some buyers want vacant possession, while investors may prefer a tenant already in place, so the lease end date can influence who your likely buyers are. Presenting the apartment well, with clear documents ready, usually shortens the process.
Gather title, permit and building committee documents
Resolve municipal tax and committee balances
Review any lease in place
Plan the transfer of proceeds
Israeli Capital Gains Considerations
Israel taxes gains on the sale of real estate, with exemptions available in certain cases for residential apartments. Eligibility for exemptions can depend on residency status, the number of properties owned and the history of previous exemptions. Foreign residents may face specific conditions.
The rules are detailed and change over time, so an Israeli tax advisor should review your position well before listing the property.
The US Side of a Sale
For US tax purposes, the gain is calculated in dollars, taking into account the purchase price, improvements and depreciation claimed if the property was rented. Currency movements can make the US gain differ significantly from the Israeli one. Foreign tax credits may reduce double taxation. A US CPA should prepare the calculation before you sign.
Repatriating the Proceeds
Sale proceeds arrive in shekels. Converting and transferring them to the United States raises the same questions as the original purchase: conversion timing, bank fees and documentation. Israeli banks may ask for proof that taxes on the sale have been settled before releasing large transfers abroad. Allow time for this.
Other Exit Routes
Not every exit is a sale. Some owners transfer the property to children during their lifetime, which has tax implications in both countries. Others hold it until death, in which case heirs must obtain an Israeli succession or probate order and consider US estate tax. Participation in urban renewal can also change the shape of an exit, since an owner may receive a new apartment rather than cash.
Each route should be discussed with lawyers and tax advisors in both countries.
Keeping the Plan Current
Review the exit plan when family circumstances, residency, tax rules or the property itself change. Moving to Israel, for example, can alter your status and the Israeli rules that apply. We do not provide tax, legal or investment advice, but we can help assess the market and the property when the time comes.
Frequently asked questions
Will I pay tax in both Israel and the United States when I sell?
Both countries may tax the gain, with credits designed to reduce double taxation. The outcome depends on your status and circumstances, so seek advice early.
Can I sell while living in the United States?
Yes. Many owners sell through a power of attorney granted to their lawyer, although some steps may require signatures at a consulate or before a notary.
How long does a sale take?
It varies with the market, the property and the buyer's financing. Legal and tax approvals add time after signing.
What records should I keep for the exit?
Keep the purchase contract, tax filings, invoices for improvements, loan documents, rental records and proof of all payments.
Elkayam Group
Elkayam Group, the name under which Kobi Elkayam Real Estate Ltd operates on Rival Street 37 in Tel Aviv, belongs to a family dating to the forties and three generations of experience. Its activity in development, urban renewal, TAMA 38, pinui-binui and combination deals, alongside partner companies that can provide guarantees, gives it perspective on how properties change over time. The team works in Hebrew, English and French with American owners from purchase through to exit.
Contact us when you begin thinking about selling, and we will help you prepare the property and the process.
+972-53-658-4252 · support@kobielkayamrealestateltd.com · Rival St 37, Tel Aviv