The Quick Answer
An Israeli תלוש משכורת (tlush maskoret) (payslip) lists, from top to bottom, your gross ברוטו (bruto), then four distinct deductions (מס הכנסה (mas hachnasa) income tax, ביטוח לאומי (bituach leumi) national insurance, היטל בריאות (hetel briut) health tax, and your share of pension plus קרן השתלמות (keren hishtalmut)), then your net נטו (neto), then a section below the line listing what your employer pays on top of your gross into your pension and keren hishtalmut. Olim who made aliyah on or after 1 January 2022 get extra נקודות זיכוי (nekudot zikui) (tax credit points) worth 242 ILS each per month in 20261.
General information, not advice. This is general information, not tax, legal, or financial advice. Cross-border (US/UK) and Israeli tax interact in complex ways, and FATCA, FBAR, and PFIC consequences for US-citizen olim can be financially severe. Consult a qualified cross-border professional before relying on payslip-derived figures for a US, UK, Canadian, or South African return.
Why does an Israeli payslip have so many lines?
The first Israeli payslip lands as a Hebrew PDF with twenty or thirty line items and almost no plain-language summary. That is not a translation problem; Israeli payslips really do carry far more lines than a US pay stub or a UK payslip, because Israeli employment law requires the employer to surface every component on every single payslip rather than rolling them into year-end summaries. The Wage Protection Law (Chok Hagant Hasachar) mandates a fully itemized payslip every month1, and the items below are not editorial choices, they are statutory.
The 2026 deduction rate sheet
Before walking the payslip line by line, the table below pins the rates the calculations on your tlush depend on for calendar year 2026°. Bituach Leumi, hetel briut, and the income-tax brackets are updated by the Israeli government in January each year against CPI and average-wage data, so re-check these figures the following January before relying on them3.
| Line item | 2026 rate | Threshold / cap |
|---|---|---|
| Mas hachnasa bracket 1 | 10 percent | On monthly income up to 7,010 ILS |
| Mas hachnasa bracket 2 | 14 percent | 7,011 to 10,060 ILS |
| Mas hachnasa bracket 3 | 20 percent | 10,061 to 19,000 ILS |
| Mas hachnasa bracket 4 | 31 percent | 19,001 to 25,100 ILS |
| Mas hachnasa bracket 5 | 35 percent | 25,101 to 46,690 ILS |
| Mas hachnasa bracket 6 | 47 percent | 46,691 to 60,130 ILS |
| Mas yasaf surtax | +3 percent | On monthly income above 60,130 ILS |
| Bituach leumi: employee share (low band) | 1.04 percent | On gross up to 7,703 ILS per month |
| Bituach leumi: employee share (high band) | 7 percent | 7,703 to 51,910 ILS; nothing above the ceiling |
| Hetel briut: employee health tax (low band) | 3.23 percent | On gross up to 7,703 ILS per month |
| Hetel briut: employee health tax (high band) | 5.17 percent | 7,703 to 51,910 ILS; nothing above the ceiling |
| Mandatory pension: employee share | 6 percent | Of gross, up to the pension contribution ceiling |
| Mandatory pension: employer share | 6.5 percent + 8.33 percent severance | Total 14.83 percent of gross paid above your salary |
| Keren hishtalmut: employee share | 2.5 percent (typical) | Contractual; not statutorily mandatory |
| Keren hishtalmut: employer share | 7.5 percent (typical) | Up to the annual tax-exempt ceiling |
| Nekudat zikui value (monthly) | 242 ILS | Each credit point reduces tax by this amount per month |
The earnings section line by line
Schar yesod (שכר יסוד), base salary. Your contractual monthly wage. Every other earnings line and every deduction percentage is calculated against this or a related base.
Sh'ot nosafot (שעות נוספות), overtime. Hours past the legal daily or weekly cap, paid at premiums of 125 percent for the first two extra hours and 150 percent thereafter under Israeli labor law. Always taxable.
Dmei nesia (דמי נסיעות), travel reimbursement. Commuting reimbursement paid up to a daily cap set by collective agreement. It appears in your earnings column but is not part of the gross figure used to compute mas hachnasa1. Two line items that look identical are taxed differently: this is one of them.
Mtanot (מתנות), gifts, or havraah (הבראה), recreation pay. A small annual recreation supplement, paid usually in summer. Havraah is taxable; certain gift-day items are partially exempt.
Bonus / premia (פרמיה / בונוס). Performance compensation. Fully taxable as ordinary income at your marginal mas hachnasa rate.
The deduction section line by line
Mas hachnasa (מס הכנסה), income tax. Israel runs a six-bracket progressive system in 2026 starting at 10 percent and climbing to 47 percent1, with a 3 percent surtax (mas yasaf) on monthly income above 60,130 ILS for a top effective rate of 50 percent. Your employer applies your נקודות זיכוי (nekudot zikui) (tax credit points) directly against the gross tax before deducting from your pay. New olim get extra credit points on top of the baseline 2.25 points every resident gets, declared on annual Form 1018. For anyone who made aliyah on or after 1 January 2022 the extra-point schedule runs 54 months and is back-loaded: 1 point per month in months 1 to 12, 3 points per month in months 13 to 30, 2 points per month in months 31 to 42, then 1 point per month in months 43 to 542. Worth checking your tlush in each transition month: every point at the 2026 monthly value of 242 ILS reduces your tax bill by 242 ILS per month.
Bituach leumi (ביטוח לאומי), national insurance. The employee-share line. For 2026 it is 1.04 percent of gross below the 7,703 ILS monthly threshold and 7 percent of gross between 7,703 and the monthly ceiling of 51,910 ILS3. Above the ceiling no further bituach leumi is deducted. There is no US Social Security totalization agreement with Israel, which means US-citizen olim who pay both US Social Security (self-employed) and Israeli bituach leumi cannot offset one against the other6. For salaried US-citizen olim, only Israeli bituach leumi applies because the US system taxes employees only on US-source wages.
Hetel briut (היטל בריאות), health tax. Funds your kupat cholim membership and the universal public health insurance system. 3.23 percent of gross below the 7,703 ILS monthly threshold and 5.17 percent above, up to the same monthly ceiling3. Both bituach leumi and hetel briut are collected by Bituach Leumi but they are conceptually and legally separate.
Pensia oved (פנסיה עובד), employee pension share. 6 percent of your gross (more under some collective agreements), deducted from your salary and deposited directly into your designated pension fund. Mandatory pension enrollment from your first day under the Pension Extension Order4. This is your money flowing into a long-term savings vehicle, not a tax.
Keren hishtalmut oved (קרן השתלמות עובד), employee study-fund share. Typically 2.5 percent of gross, also deducted from your salary, going into a six-year study-fund account. Tax-free on withdrawal after the six-year hold period (or earlier for professional development), subject to the annual contribution cap4. Not statutorily mandatory; included in most full-time employment contracts.
Below the net: the employer-cost block
Below the net total a second block lists what your employer pays into your savings vehicles on top of your gross. These do not reduce your net bank deposit and they are not taxes; they are deferred compensation owned by you, sitting in your pension and keren hishtalmut accounts.
- Pensia maavid (פנסיה מעביד), employer pension. Typically 6.5 percent of your gross flowing into your pension fund, plus a separate 8.33 percent earmarked as severance (pitsuyim) that becomes accessible if you are dismissed or retire4.
- Keren hishtalmut maavid (קרן השתלמות מעביד), employer study fund. Up to 7.5 percent of your gross, up to the annual tax-exempt ceiling, deposited into your keren hishtalmut account4.
Add the employer contributions to your gross and you get the total monthly compensation cost to the employer, which is the number to compare when weighing two offers. Take the standard employer add-ons of 6.5% pension plus 8.33% severance, with keren hishtalmut adding another 7.5% when it is offered. A 20,000 ILS gross with all three is about 24,470 ILS in total compensation; a 22,000 ILS gross with pension and severance but no keren hishtalmut is about 25,270 ILS. The higher-gross offer still leads on total cost, but keren hishtalmut narrows the gap from the 2,000 ILS of headline gross down to about 800 ILS, which is exactly why you compare totals, not gross.
Are Israeli pension and keren hishtalmut a PFIC problem for US citizens?
For US-citizen olim, Israeli pension funds and keren hishtalmut accounts are non-US pooled investment vehicles, which means they fall into the IRS Passive Foreign Investment Company (PFIC) regime under IRC sections 1291 to 12985. The default treatment under IRC section 1291 taxes distributions and gains at the highest historic ordinary rate plus an interest charge; alternative elections (qualified electing fund, mark-to-market) require annual Form 8621 filings with specific information that Israeli funds rarely provide in the required US format.
Two practical points temper this for salaried olim:
- Employer pension is generally tolerated. US tax practice for employer-mandatory pension funds treats them more permissively in many cases than voluntary investments; the US-Israel tax treaty does not directly address PFIC for pension funds, but professional consensus is that employer-mandatory enrollment is rarely the worst PFIC exposure a US-citizen oleh has. Form 8621 may still apply; ask a cross-border accountant before your first US filing.
- Keren hishtalmut is more exposed and is often negotiable. Where keren hishtalmut is contractually optional, US-citizen olim sometimes negotiate to substitute the employer keren hishtalmut percentage into salary or into an employer-paid US-domiciled arrangement. The trade-off is the Israeli tax-free six-year withdrawal benefit against the US PFIC reporting and tax friction. There is no single right answer; the calculus depends on planned years in Israel, marginal US tax bracket, and the employer's willingness to restructure.
FBAR (FinCEN 114) reporting7 applies regardless of PFIC: the aggregate balance of your pension, keren hishtalmut, and Israeli bank accounts crossing 10,000 USD at any point in the year triggers the filing. UK, Canadian, and South African olim are not in PFIC and not in FBAR; CRS reporting from the Israeli pension manager to the home-country tax authority replaces them.
An Israeli payslip deducts mas hachnasa (income tax across six 2026 brackets from 10 to 47 percent), bituach leumi and hetel briut (each split into a low band below the 7,703 ILS monthly threshold and a high band above it), and your employee share of pension and keren hishtalmut. Olim who made aliyah on or after 1 January 2022 get extra tax credit points on a 54-month back-loaded schedule, and olim who made aliyah between 5 November 2025 and 31 December 2026 may also qualify for a temporary 0 percent income-tax exemption on Israeli-source earned income.
The most common cause for new olim is missing nekudot zikui on Form 101. If your employer has not received your signed Form 101 declaring your status and credit points, the payroll system applies the baseline 2.25 points and skips the extra oleh points entirely, costing roughly 242 to 726 ILS per month in over-withholding depending on which month of the 54-month oleh schedule you are in. The fix is to submit Form 101 immediately; prior over-withholding becomes a refund at year-end through the annual return.
Bituach leumi funds the Israeli social-insurance system: maternity, disability, unemployment, child allowances, old-age pension. Hetel briut is the dedicated health-tax line that funds your kupat cholim membership under the National Health Insurance Law. Both are collected by the National Insurance Institute, but they finance different statutes and they sit on different lines of your payslip with different rates.
The mandatory pension scheme under the Pension Extension Order is funded by both sides: the employee deducts 6 percent from gross and the employer pays an additional 6.5 percent out of pocket plus a further 8.33 percent earmarked for severance. The total going into your pension account each month is 12.5 percent of your gross plus the severance earmark. The two-sided structure is by statute, not negotiation.
The keren hishtalmut tax-free withdrawal after six years is a meaningful Israeli benefit, while PFIC reporting friction and the punitive default tax method on US returns are a meaningful US cost. How the trade-off lands depends on the marginal US bracket, how many years are planned in Israel, and whether the employer can restructure the keren hishtalmut percentage into other compensation. This is a cross-border question for a US-Israel accountant rather than something to settle from the payslip alone.
The standing new-resident 10-year exemption applies only to non-Israeli-source income (foreign rental, foreign dividends, foreign-employer salary), so it does not touch wages from an Israeli employer, which are Israeli-source income taxed at the standard brackets on your payslip. Separately, a temporary 2026 reform lets olim who made aliyah between 5 November 2025 and 31 December 2026 claim a 0 percent income-tax exemption on Israeli-source earned income (employment salary and self-employed business income) across the 2026 to 2030 tax years, under an annual shekel ceiling that declines over time (600,000 ILS in 2026, 1,000,000 ILS in 2027 and 2028, then 350,000 ILS in 2029 and 150,000 ILS in 2030). Bituach leumi and hetel briut are still deducted in full. For an oleh inside that window the income-tax line on the tlush can be reduced or zeroed up to the ceiling rather than charged at the standard brackets, so day-one full income-tax withholding is not a safe assumption without checking eligibility with payroll.
Israel applies a 3 percent surtax on monthly income above 60,130 ILS in 2026, on top of the standard 47 percent top bracket. The effective top combined rate is 50 percent. On most olim payslips below that threshold the line does not appear; on senior-management payslips it shows as a separate sub-line at the bottom of the deductions block.
Three checks each month. First, the net figure on the payslip must match the credit to your bank account to the agora. Second, the year-to-date column should add up cleanly across twelve months at year-end. Third, run the gross through the 2026 brackets and rates as a back-of-envelope check; if the net comes out more than a few hundred ILS lower than the bracketed estimate after accounting for credit points, raise it with payroll the same week. Errors are common in the first three months after a hire or after a salary change, especially for olim whose Form 101 is processed late.
Next step
With the line items mapped, the next question is the structural one: where, exactly, does the gap between your bruto and your neto go, and how much of it is actually money leaving your control versus deferred compensation flowing into your own savings accounts? Read the next article in this series to walk through bruto-to-neto on a worked example.
