How do progressive tax brackets work in Israel?
מס הכנסה (Mas Hachnasa) in Israel is progressive, meaning different portions of your income are taxed at different rates. For 2026 the scale on salary runs from 10% on the first NIS 7,010 a month to 47% above NIS 46,690, with a 3% surtax on very high income°5. A common misconception is that earning more can push you into a higher bracket and reduce your take-home pay. That can't happen. Each bracket only applies to the income within its range. Earning more always leaves you better off.
If you are a new oleh, the same scale applies to you, but with extras a lifelong Israeli never gets: additional credit points for your first 54 months if you arrived from 2022 onward (42 months for earlier arrivals), and, for anyone who became a resident between 5 November 2025 and 31 December 2026, a temporary 0% rate on Israeli salary and business income. Both are covered below, and you can run your own salary through the 2026 scale with the Olim tax calculator.
This is educational content, not tax advice. For your personal situation, consult a licensed Israeli tax accountant.
What are the Israeli income tax brackets for 2026?
For 2026 the six bands on earned income are 10%, 14%, 20%, 31%, 35% and 47%, with the annual bands ending at NIS 84,120, 120,720, 228,000, 301,200 and 560,280, and monthly steps at NIS 7,010, 10,060, 19,000, 25,100 and 46,690, as published in the Tax Authority's April 2026 withholding tables°5. The Tax Authority publishes the bands annually and payroll applies them monthly, which is why Israelis usually quote the monthly figures. Both are the same scale: the monthly step is the annual band divided by 12.
| Monthly income (NIS) | Annual income (NIS) | Tax rate |
|---|---|---|
| 0 – 7,010 | 0 – 84,120 | 10% |
| 7,011 – 10,060 | 84,121 – 120,720 | 14% |
| 10,061 – 19,000 | 120,721 – 228,000 | 20% |
| 19,001 – 25,100 | 228,001 – 301,200 | 31% |
| 25,101 – 46,690 | 301,201 – 560,280 | 35% |
| Above 46,690 | Above 560,280 | 47% |
On top of that scale there is a surtax. Under section 121B of the Income Tax Ordinance, an individual whose taxable income for the year exceeds NIS 721,560, about NIS 60,130 a month, pays an extra 3% on the portion above that line°45. That is where the commonly quoted "50% top rate" comes from: 47% plus the 3% surtax. The surtax also reaches income taxed at special rates, such as capital-market income and rental income taxed under section 122, and since the Economic Efficiency Law published in December 2024, taxable income from capital sources above the same line carries a further 2%, so 5% in total on that part°5.
What changed in 2026?
The 20% band got wider, and the threshold just above it moved up too, so less of a salary reaches the higher rates: the 35% band now starts at NIS 301,201 a year instead of 269,28115. Chapter C of the 2026 Economic Efficiency Law amended section 121 of the Income Tax Ordinance on 31 March 2026, with effect from 1 January 2026. The 20% band now runs from NIS 120,721 to 228,000 a year (10,061 to 19,000 a month) instead of ending at 193,800 (16,150 a month), and the 31% band runs from 228,001 to 301,200 (19,001 to 25,100 a month) instead of ending at 269,280 (22,440 a month). The 10%, 14%, 35% and 47% rates, the first two thresholds, the 560,280 line where 47% starts and the 721,560 surtax line are the same numbers they were in 2025°15, so this was a legislated move of two thresholds rather than inflation indexation.
In shekels, the change only matters if you earn more than 16,150 NIS a month, because that is where the old and new scales part ways. At 24,000 NIS a month the income tax before credit points is 4,466 NIS on the 2026 scale against about 4,842 NIS on the 2025 edges, roughly 376 NIS a month less. At 30,000 NIS a month the gap is about 420 NIS a month°15.
Because the amendment passed at the end of March but applies from 1 January, the Tax Authority reissued its withholding tables in April 20265. If your early-2026 payslips were calculated on the older edges, ask your payroll department how the difference is being settled, or check it when you file an annual return. And do not assume the thresholds will move again next January: check the Tax Authority's current table before relying on a number.
Worked Example: 15,000 NIS/Month Gross
Let's say your monthly ברוטו (Bruto) (gross salary) is 15,000 NIS. Here's how the tax is calculated before credit points:
- First 7,010 NIS × 10% = 701 NIS
- Next 3,050 NIS (7,011–10,060) × 14% = 427 NIS
- Next 4,940 NIS (10,061–15,000) × 20% = 988 NIS
Total income tax before credit points: 2,116 NIS°5. A credit point is worth NIS 2,904 a year, about 242 NIS a month, so the standard 2.25 credit points for a male employee are worth roughly 545 NIS a month and the income tax actually withheld would be approximately 1,571 NIS. That leaves roughly 13,429 NIS once income tax alone is deducted°56, but your actual נטו (Neto) (net) take-home is lower than this, because Bituach Leumi, health levy, and pension contributions are still subtracted on top of income tax. This example is unchanged by the 2026 widening, because 15,000 NIS sits below the point where the scales diverge.
Worked Example: 30,000 NIS/Month Gross
For a higher earner at 30,000 NIS/month gross, on the 2026 scale:
- First 7,010 NIS × 10% = 701 NIS
- Next 3,050 NIS × 14% = 427 NIS
- Next 8,940 NIS (10,061–19,000) × 20% = 1,788 NIS
- Next 6,100 NIS (19,001–25,100) × 31% = 1,891 NIS
- Next 4,900 NIS (25,101–30,000) × 35% = 1,715 NIS
Total income tax before credit points: 6,522 NIS. After 2.25 standard credit points, approximately 5,977 NIS. The effective income tax rate on this salary is about 19.9%°56, well below the headline 35% bracket rate, and Bituach Leumi, health levy and pension are deducted separately.
To run your own numbers, the Olim tax calculator applies the 2026 scale together with the extra oleh credit points, and the bruto-neto calculator shows the whole payslip, with National Insurance, the health levy and pension taken off as well.
How are new olim taxed differently?
New olim are taxed on the same bracket scale, with three extra rules: additional credit points for up to 54 months, a temporary 0% rate on Israeli salary and business income for arrivals between 5 November 2025 and 31 December 2026, and a 10-year exemption on foreign-source income. Each one has its own guide on this site; this section is the map.
Extra credit points for 54 months
Every Israeli resident gets 2.25 base credit points (2.75 for women), each worth NIS 242 a month in 2026. Olim who arrived on or after 1 January 2022 get more on top: 1 extra point for the first 12 months after aliyah, 3 for the next 18 months, 2 for the next 12 and 1 for the final 12, a 54-month schedule that peaks at 726 NIS a month off the bill in months 13 to 306. Because a credit point is subtracted from the tax rather than from the income, it is worth the same 242 NIS in any band, as long as your tax bill is at least that large: credit points cannot take the tax below zero. On a low salary part of the oleh allowance goes unused. At 8,000 NIS a month, for example, the income tax before credits is about 840 NIS on the 2026 table, while 2.25 base points plus 3 oleh points in months 13 to 30 are worth about 1,270 NIS°56. How the schedule works month by month, and how to make sure your employer applies it, are in Understanding Tax Credit Points and the oleh credit point schedule.
A 0% rate on Israeli earned income for arrivals in the 2025-2026 window
A temporary statute, the Encouragement of Aliyah to Israel and Return to It Law (Temporary Order), 5786-2026, exempts from income tax the salary and business income earned in Israel by a new oleh, or by a veteran returning resident who spent more than 10 years abroad, who became an Israeli resident between 5 November 2025 and 31 December 2026. The exemption runs for tax years 2026 to 2030, up to an annual ceiling: NIS 600,000 in 2026, 1,000,000 in 2027 and again in 2028, 350,000 in 2029 and 150,000 in 203057. It is given on top of every other oleh benefit, including the credit points above. It covers earned income only, so dividends, interest and rent are not inside it, and the Tax Authority has said a circular with the full conditions will follow. If you arrived before 5 November 2025 you are outside the window and the brackets above apply to your salary as usual. The mechanics, and how the benefit interacts with the reporting change, are in the 2026 tax reform guide for olim.
The 10-year exemption on foreign income
Income from outside Israel (a foreign salary, rent on a property abroad, dividends and interest from foreign companies, a foreign pension) is exempt from Israeli tax for 10 years from the date you became a resident, so during that window the brackets above apply to your Israeli-source income only. What changed on 1 January 2026 is reporting: olim who arrived up to 31 December 2025 are also exempt from reporting that foreign income and those foreign assets, while olim arriving from 1 January 2026 must report them on an annual return even though the income stays tax-exempt for the 10 years8. Tax-exempt and report-exempt are no longer the same thing. The full rules are in the 10-year exemption guide.
Which passport you hold matters here. A US citizen keeps filing a US return on worldwide income, including Israeli salary that Israel exempts, so read the US tax obligations guide before treating any of these Israeli benefits as the end of the story. UK olim have their own residence and UK-source income rules: HMRC usually still taxes UK income such as rent from a UK property or UK wages even once you are no longer UK resident, with relief under the double-taxation agreement where it applies11, so the Israeli scale is not necessarily the only one you meet. The residence tests and the timing rules are in the UK tax obligations guide.
Knowledge Check
How much of the first ~84,000 NIS of annual income is taxed in Israel?
What's the difference between your effective rate and marginal rate?
The marginal rate is the rate that applies to your next shekel of income. The effective rate is the percentage of your total income that goes to tax. Because of the progressive structure, effective rates are always lower than the marginal rate. On the 2026 table above, 15,000 NIS a month is taxed at 2,116 NIS before credit points, an effective 14.1% against a 20% marginal rate, and 25,000 NIS a month comes to 4,776 NIS, or 19.1%, against a 31% marginal rate°5. Standard credit points pull both lower still: about 10.5% and 16.9% after 2.25 points°56.
What else comes out of your payslip besides income tax?
Income tax is not the only deduction from your gross salary. You'll also see deductions for:
- Bituach Leumi (National Insurance): the employee contribution is 1.04% on the share of wage up to 60% of the average wage, NIS 7,703 a month as of January 2026, and 7% above it, up to a ceiling of NIS 51,910 a month°2
- Heitel Briut (Health Levy): 3.23% below that same threshold and 5.17% above it, up to the same ceiling, funding your Kupat Cholim3
- Pension contributions: under the mandatory pension extension order the employee's share is 6% of the insured wage since 1 January 2017, with the employer adding 6.5% plus a severance component on top13
Put together on the 15,000 NIS example above: income tax after standard credit points of about 1,571 NIS, National Insurance of about 591 NIS and a health levy of about 626 NIS take roughly 19% of gross, and a 6% pension deduction on the full salary brings it to about 25%. At 25,000 NIS a month the same four lines come to about 33%°235613. Family situation, extra credit points and the pension arrangement your employer runs all move these figures.
Israel taxes salaried income through progressive bands. In 2026 they start at 10% on the first NIS 7,010 a month and reach 47% above NIS 46,690, with a further 3% surtax on income above about NIS 60,130 a month. Only the income inside each band is taxed at that band's rate, so earning more never lowers your take-home pay, and credit points reduce the actual tax owed on top.
The Tax Authority publishes them annually for earned income. For 2026: 10% on the first NIS 84,120, 14% to 120,720, 20% to 228,000, 31% to 301,200, 35% to 560,280 and 47% above that. Divided by 12 the monthly steps are 7,010, 10,060, 19,000, 25,100 and 46,690. A 3% surtax applies above NIS 721,560 a year.
The 2026 rates on salary and business income are 10%, 14%, 20%, 31%, 35% and 47%, applied to annual bands ending at NIS 84,120, 120,720, 228,000, 301,200 and 560,280 (monthly 7,010, 10,060, 19,000, 25,100 and 46,690). A 3% surtax applies above NIS 721,560 a year (5% on income from capital sources), so the highest combined rate on salary is 50%. The 2026 Economic Efficiency Law raised the top of the 20% and 31% bands with effect from 1 January 2026.
Mas hachnasa is Hebrew for income tax, and Israelis also use it as shorthand for the Tax Authority's income-tax offices (misrad mas hachnasa) that collect it. For a salaried employee it is withheld by the employer every month according to the progressive bands, after subtracting credit points (nekudot zikui). It is separate from Bituach Leumi (National Insurance) and the health levy, which appear as their own lines on the payslip.
Not automatically. Annual inflation indexation was frozen by the Economic Efficiency Law passed in December 2024, but the 2026 Economic Efficiency Law raised the top of the 20% and 31% bands by statute with effect from 1 January 2026, so the scale did change this year. Check the Tax Authority table for the year you are filing before relying on a number.
On the same bracket scale, with three extras. Olim who arrived from 1 January 2022 get additional credit points for 54 months after aliyah: 1 extra point for 12 months, then 3 for 18, 2 for 12 and 1 for 12. Olim who arrived before 2022 follow the older 42-month schedule. Olim who became residents between 5 November 2025 and 31 December 2026 pay 0% on Israeli salary and business income up to an annual ceiling (NIS 600,000 in 2026) through 2030. And foreign-source income is exempt from Israeli tax for 10 years, although olim arriving from 1 January 2026 must now report it.
No. Israel uses progressive bands, so each rate applies only to the portion of income inside its range. Moving into a higher bracket means only the income above the threshold is taxed at the higher rate, and your total take-home pay still rises.
No. Beyond income tax you also pay Bituach Leumi (National Insurance), the health levy, and pension contributions. These are deducted on top of income tax, so your net take-home is lower than the figure left after income tax alone.