New Tax Break for Seniors Renting Out Homes for Nursing Care

Israeli law offers a significant tax exemption on rental income for individuals aged 65 and over who move into a nursing home and rent out their former residence. This provision, outlined in section 9(25) of the Income Tax Ordinance, allows seniors to be exempt from taxes on rental income up to half of their annual nursing home expenses. This can be substantially more beneficial than the standard rental income tax exemption.

For example, a family whose parents moved into a nursing home costing 20,000 shekels per month (240,000 shekels annually) can benefit from a tax exemption of up to 120,000 shekels on their rental income. This contrasts with the regular exemption, which caps at 67,848 shekels per year. The special provision effectively doubles the potential tax-free rental income in such cases.

To qualify for this exemption, the nursing home must be a licensed facility housing at least 30 individuals over 65. It is crucial to verify the facility's eligibility before signing any rental agreements. The specific tax advantage depends on the cost of the nursing home; if the monthly cost exceeds approximately 11,308 shekels, the special provision offers a higher exemption ceiling than the standard route. Below this threshold, the regular exemption may be more advantageous.

The exemption applies specifically to the apartment the senior lived in before moving to the nursing home. Any other rental properties would fall under the standard tax regulations. Proper documentation, including the rental contract, annual receipts from the nursing home, and proof of the facility's licensing, is required to claim the exemption. Tax obligations and benefits are reassessed annually due to changes in nursing home fees and rental agreements.