Deductible expenses against rental income
- Buying an apartment in Israel
A common problem is known in cases where the apartment in question is rented and for which the mortgage was granted by the bank.
In these cases, the seller is in principle entitled to deduct part of the mortgage payments from the rental income in regard to income tax payments.
Therefore, the tax authorities may refuse to recognize the deduction of the mortgage expenses, as well as the depreciation expenses of the apartment itself, with regard to the payment of the capital gains tax.
This is not the place to expand on the complicated issue of the four tracks for paying income tax in regard to income from renting a residential apartment under section 121 of the Income Tax Ordinance and deductions under section 17 and income tax regulations.