Rental Income Tax Calculator Israel
Compare all three Israeli rental income tax tracks side by side — exemption, 10% flat rate, and marginal rates — to find the option that minimizes your annual tax bill. Based on Israel Tax Authority 2025 rates.
How Rental Income Is Taxed in Israel
Israeli rental income tax is a unique system that gives landlords a genuine choice between three distinct taxation methods. Unlike most countries where rental income is simply added to your marginal income, the Israel Tax Authority (Rashut HaMasim) allows residential landlords to select the most advantageous track each tax year under the Income Tax Ordinance. This calculator compares all three tracks using official 2025 rates so you can make an informed decision. The rules apply to Israeli-resident individuals renting out residential property within Israel — commercial rentals and foreign-property rentals follow different rules.
The Three Tax Tracks Explained
Track 1 — Exemption (Section 2): Monthly rental income up to ₪5,654 (2025 ceiling) is completely tax-free. If your rent falls between ₪5,654 and ₪11,308 (double the ceiling), a partial exemption formula reduces the exempt amount. Income above ₪11,308 per month receives no exemption at all. Married couples share one ceiling. No expenses may be deducted under this track, and no annual filing is required if your rent is fully exempt.
Track 2 — 10% Flat Rate (Section 122): You pay a flat 10% tax on the gross rental income with no deductions for expenses, depreciation, or losses. The tax must be paid within 30 days of the end of the tax year (or 30 days after receiving rent, depending on the payment schedule). This track is popular for landlords whose expenses are low relative to their rental income.
Track 3 — Marginal Rates (Regular Assessment): Rental income is added to all other taxable income and taxed at your marginal rate (10%–50% for 2025). The advantage is that all actual expenses — maintenance, insurance, property management, mortgage interest, and depreciation at 2% of the building value per year — are deductible. This track requires filing a full annual tax return.
When to Choose Each Track
Track 1 is best when your total monthly rent is under the exemption ceiling — you pay zero tax with zero paperwork. Track 2 suits landlords with low expenses and moderate rental income who want simplicity and a predictable 10% rate. Track 3 is optimal when your deductible expenses are high (especially depreciation on newer buildings) or when your other income is low enough that the combined marginal rate stays below 10%. Run the numbers through this calculator each year — the best track can change as your income and expenses shift. Based on Israel Tax Authority (mas.gov.il) guidance and Section 122 of the Income Tax Ordinance, updated April 2026.
Tips for Israeli Landlords
Keep receipts for every expense — even if you use Track 1 or Track 2 this year, you may switch to Track 3 in a future year where expenses are higher. Depreciation at 2% per year on the building portion (excluding land value) is a non-cash deduction that can significantly reduce your Track 3 tax bill. If you own multiple properties, remember that the exemption ceiling applies to your total rental income across all properties, not per property. Married couples filing jointly share one exemption ceiling of ₪5,654 — not double. Consider consulting a licensed Israeli tax advisor (Yoetz Mas) when your total rental income exceeds ₪100,000 per year, as the interplay between tracks, depreciation, and Bituach Leumi surcharges can become complex.