Rabbi Prof. Yitzhak Cohen Explains How Marriage Affects Couples’ Real Estate Tax Benefits in Israel

In a recent podcast on Channel 7, Rabbi Prof. Yitzhak Cohen discussed the significant impact marriage can have on couples’ tax benefits when buying or selling property in Israel. He explained that many couples are unaware that the moment they marry, their tax status changes, potentially costing them tens or even hundreds of thousands of shekels. The conversation, hosted by Uzi Baruch, focused on how marriage can alter couples’ standing before the Israeli Tax Authority and how a prenuptial agreement (known as a "mamona" agreement) can help preserve their rights.

Rabbi Cohen highlighted that while prenuptial agreements are often viewed negatively, as implying distrust or anticipating divorce, they can actually serve as a crucial legal tool to protect tax benefits. He emphasized that such agreements are not only for asset division upon separation but can also clarify ownership of property acquired before marriage, which is vital under the Real Estate Taxation Law. According to this law, married couples are often treated as a single tax unit, meaning a property owned by one spouse before marriage might be considered jointly owned for tax purposes, risking loss of tax benefits when purchasing or selling additional property.

The key legal case discussed was Appeal 4298/18, which established that a clear prenuptial agreement stating that a property remains the sole ownership of one spouse can help maintain the other spouse’s tax benefits. However, Rabbi Cohen warned that courts require the couple’s actual behavior to align with the agreement. Joint investments or treating the property as shared could lead tax authorities to disregard the separation. Later rulings have somewhat relaxed these requirements, focusing mainly on consistent conduct related to the property rather than complete separation in all aspects of life.

Rabbi Cohen concluded by advising couples to carefully consider the legal and tax implications before buying property and not to dismiss prenuptial agreements out of discomfort. Such agreements can protect couples financially and legally from the start of their married life, preventing costly surprises related to tax benefits.