As a US citizen looking to purchase property in Israel, you have unique considerations that differ from other foreign buyers. This guide addresses the specific requirements, tax implications, and process for American buyers.
FATCA Compliance
The Foreign Account Tax Compliance Act (FATCA) requires Israeli banks to report information about US account holders to the IRS. This means additional documentation and verification steps, but it shouldn't prevent you from obtaining a mortgage.
Required Documentation
US citizens typically need to provide: US passport, Social Security number, 2-3 years of federal tax returns, W-2s or 1099s, bank statements from US institutions, proof of employment or business ownership, and FBAR filings if applicable.
Tax Implications
Owning property in Israel has tax implications in both countries. You may be subject to Israeli property tax (Arnona), capital gains tax on sale, and US reporting requirements for foreign real estate. Consult with a cross-border tax specialist before purchasing.
Currency Considerations
Your mortgage will be denominated in Israeli Shekels (ILS), but your income is likely in US Dollars. This creates currency risk. Some strategies to manage this include: maintaining a USD-denominated savings buffer, using currency hedging products, or timing larger payments when exchange rates are favorable.
Banking Relationships
Some Israeli banks have more experience with US clients than others. Banks like Bank Hapoalim and Bank Leumi have dedicated departments for American buyers and can guide you through FATCA requirements more smoothly.
Timeline Expectations
Due to additional compliance requirements, US citizen applications may take slightly longer to process—typically 6-10 weeks from initial application to closing.