Income Tax — Brackets and Taxation

Current income tax brackets, tax calculation, credits, deductions, and strategies to reduce your tax burden.

Income tax in Israel (Mas Hachnasa) is a progressive tax that affects every working person in the country. The system can seem complicated, but understanding the basics helps you plan your finances, evaluate job offers, and make sure you are not overpaying.

The Israeli Tax Bracket System

Israel taxes income using a progressive structure with multiple brackets. As of the current rates: the first bracket is taxed at 10%, climbing through 14%, 20%, 31%, 35%, and 47% for the highest earners. A surtax of 3% (known as Mas Yoter) kicks in on annual income exceeding a high threshold. Each rate only applies to income within that specific bracket range.

Who Pays Income Tax?

All Israeli residents pay income tax on their worldwide income. Non-residents are taxed only on Israeli-sourced income. Employees have tax withheld by their employer each month. Self-employed individuals make advance payments (Mikdamot) throughout the year and reconcile with an annual tax return.

Key Deductions and Benefits

Israeli taxpayers benefit from tax credit points (Nekudot Zikuy), deductions for pension contributions, recognized expenses for the self-employed, and special benefits for new immigrants. Charitable donations to approved organizations provide a 35% tax credit. Investments in certain approved programs may also qualify for tax benefits.

Filing Requirements

Most salaried employees in Israel do not need to file an annual tax return — their employer handles deductions through payroll. However, filing may be required if you have multiple income sources, earn above a certain threshold, have foreign income, or are self-employed. Filing voluntarily can also be worthwhile if you are due a refund.

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The information on this page is for educational purposes. Please consult a professional before making financial decisions.

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Frequently asked

+−How does the Israeli income tax system work?

Israel uses a progressive system with brackets ranging from 10% to 47%, plus a 3% surtax for very high earners. Each bracket only applies to income within that range, not your entire salary.

+−Do all Israelis need to file a tax return?

Most salaried employees do not — their employer handles deductions through payroll. Filing is required if you have multiple income sources, earn above a certain threshold, have foreign income, or are self-employed.

+−What deductions reduce my income tax?

Key deductions include tax credit points, pension contributions, recognized business expenses for the self-employed, and charitable donations to approved organizations which provide a 35% tax credit.

+−What is the National Insurance contribution rate?

Employees pay 3.5% on income up to 60% of the average wage and 12% on income above that threshold. Your employer also contributes their portion separately. These rates are updated periodically.

+−How does rental income get taxed in Israel?

Residential rental income up to a certain monthly threshold can be tax-exempt. Above that, you can choose between a flat 10% tax on gross rent or regular progressive tax rates with expense deductions.

+−Are charitable donations tax-deductible in Israel?

Donations to approved institutions (Mosad Tziburi) qualify for a 35% tax credit on amounts above a small minimum threshold. Keep donation receipts and verify the organization's approved status.

+−What is the deadline for filing an annual tax return in Israel?

The standard deadline is April 30 of the following year for online filing, with extensions available through accountants. Late filing can result in fines and interest penalties from the Tax Authority.