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Keren Hishtalmut Calculator for Olim
See how much of your keren hishtalmut deposit earns the tax break, and what it saves you, starting from what the instrument actually is.
A keren hishtalmut (further-education fund) is the one Israeli account with no real counterpart in a US, UK, Canadian, South African, French or Australian pay package, so most olim arrive with no intuition for it at all. It is a medium-term savings account: money left in it for six years comes out with its investment growth free of Israeli capital-gains tax, up to a yearly deposit ceiling. For an employee, you put in 2.5% of salary and your employer adds 7.5% on top; that employer share is free money no home-country plan hands you. A self-employed person opens one directly and deposits themselves. This calculator starts from what the thing is, then shows how much of your deposit sits inside the tax-recognised ceiling and roughly what the tax break is worth in the first year.
Two things trip newcomers up. The six-year clock that makes withdrawals tax-free runs from your first deposit, not from the day the account was opened, so getting one started early, even at a small amount, is worth more than waiting for a perfect fund. And the tax-recognised ceilings are indexed periodically, so the tool pre-fills the current sourced figures but lets you edit them rather than baking in a number that quietly goes stale.
US citizens and green-card holders, read this first. A keren hishtalmut is a pooled Israeli fund, which makes it a PFIC (Passive Foreign Investment Company) for a US person. The Israeli tax exemption does not bind the IRS: the default section 1291 regime can tax the growth punitively and needs Form 8621 every year, and the balance counts toward your FBAR. This is the classic case where the standard advice for an Israeli colleague inverts for you, so weigh a keren against a US-compliant alternative with a cross-border adviser. This is general information, not tax, legal or financial advice.
Pair this with the Pension Comparison tool to see your home-country retirement accounts beside the Israeli vehicles, and the full keren hishtalmut guide for the background.
What a keren hishtalmut is
A keren hishtalmut (further-education fund) is a medium-term savings account with no real counterpart in a US, UK, Canadian, South African, French or Australian pay package. Money left in it for six years comes out with its investment growth free of Israeli capital-gains tax, up to a yearly deposit ceiling. For an employee it exists only where the job provides for it: the employee puts in 2.5% of salary and the employer adds 7.5% on top, and that employer share is the part no home-country plan gives you. A self-employed person opens one directly and deposits themselves. It is not a pension: you are not locked in until retirement, only until the fund matures.
Your situation
ceilings as of 2026
Monthly gross salary
₪14,000
Tax-recognised monthly salary ceiling
Default ₪15,712/month (Israel Tax Authority, frozen since 2016). It is indexed periodically, so confirm the current figure with the Israel Tax Authority and edit if needed.
₪16,800
Annual deposit
₪16,800
Inside the tax break
₪2,520
Est. first-year tax saving
Deposit against the ceiling (₪16,800 of ₪18,854)
Inside the ceiling (tax break earned) (₪16,800)Unused ceiling (₪2,054)
The assumptions behind this number
The deposit rates (2.5% + 7.5%, or 4.5% / 7%)The ceilings you set (₪15,712/mo, ₪20,520/yr)Your marginal income-tax rateYour salary or profit staying level
To show a single number, this calculation assumes the values below stay fixed for the whole period. In reality they will change, so treat the result as a ballpark, not a precise forecast. The tax saving is a first-year estimate from your marginal rate alone; your real rate depends on credit points, other income and your exact bracket. The ceilings are indexed periodically, so a multi-year total is a rough guide, not a forecast.
US citizens and green-card holders: the tax break is Israeli-only
A keren hishtalmut is a pooled Israeli fund, which makes it a PFIC (Passive Foreign Investment Company) for a US person. The Israeli capital-gains exemption does not bind the IRS: the default section 1291 regime can tax the growth punitively and requires Form 8621 each year, and the balance counts toward your FBAR once your foreign accounts top $10,000 at any point in the year. What is optimal advice for an Israeli colleague can be the opposite for you, so weigh a keren against a US-compliant alternative with a cross-border adviser before opening one.
The six-year clock starts on your first deposit
The tax-free withdrawal date is six years from the date of the FIRST payment into the account, not from the day you opened it and not from each later deposit (Israel Tax Authority circular, 5 August 2020). So opening one sooner, even at a small amount, starts the clock earlier. A holder who has reached retirement age can withdraw after three years instead.
How the employee tax break actually works
The employer 7.5% share is exempt income at the moment it is deposited, up to the salary ceiling, so it never appears as taxable pay on your payslip. Your own 2.5% comes out of net wages and is not a current-year deduction. Above the salary ceiling the employer share becomes taxable to you when it is paid in, which is why the estimated saving here nets that off rather than showing a headline gross figure.
Depositing above the ceiling
You can keep money in the fund above the tax-recognised ceiling, and it still earns the fund's return. Only the real (inflation-adjusted) growth on the excess is taxed, at 25%, and only when you withdraw. That can still beat an ordinary taxable account, but the headline "tax-free" only describes deposits inside the ceiling.
The account is yours to steer
Even when an employer files the paperwork, you choose the fund manager and the investment track, and the management fee is negotiable. Ask for the fee on the balance and the fee on each deposit separately, and for three to five years of returns on the specific track. You can move the fund to another manager later without losing the six-year seniority already built.
- Israel Tax Authority, keren hishtalmut and provident-fund tax treatment gov.il ↗ ↩
- Israel Tax Authority, Income Tax Circular 4/2014 (salaried keren hishtalmut salary ceiling) gov.il ↗ ↩
- Israel Tax Authority circular, 5 August 2020 (six years runs from the first deposit) gov.il ↗ ↩
- Capital Market, Insurance and Savings Authority (provident and further-education fund regulation) gov.il ↗ ↩
- IRS, About Form 8621 (Information Return by a Shareholder of a PFIC) irs.gov ↗ ↩
שתפו:
Frequently asked questions
A tax-advantaged medium-term savings fund. For employees it is funded jointly: 2.5% of your salary plus 7.5% from your employer, where the job provides for one (it is not universal). For the self-employed there is no employer side; you deposit yourself. After six years you can withdraw the balance plus its growth free of Israeli capital-gains tax, up to a deposit ceiling. It is not a pension, so you are not locked in until retirement, only until the fund matures.
From the date of your first deposit into the account, not from when it was opened and not from each later deposit (Israel Tax Authority circular, 5 August 2020). That is why starting one sooner, even at a modest amount, matters. A holder who has already reached retirement age can withdraw after three years instead.
For an employee, the 2.5% + 7.5% deposit is tax-recognised up to a monthly salary ceiling (a sourced default of about ₪15,712/month, frozen since 2016). For the self-employed, up to 7% of annual net profit earns the capital-gains exemption, and the first 4.5% of it also reduces this year's taxable income, each subject to its own annual cap. These caps are indexed, so the tool lets you edit them; confirm the current-year figure with the Israel Tax Authority.
Maybe not in the same form, and not without advice. Because a keren hishtalmut is a PFIC for US persons, the Israeli tax-free status does not carry over to your US return, and the section 1291 regime plus Form 8621 can erode or reverse the benefit. The employer 7.5% is still real money, so the decision is genuinely case-by-case; take it with a cross-border adviser rather than from Israeli-side advice.
Yes, and it still earns the fund's return. But only deposits inside the ceiling get the full exemption; on the excess, the real (inflation-adjusted) growth is taxed at 25% when you withdraw. That can still beat an ordinary taxable account, but the "tax-free" headline only describes the in-ceiling part.
Related reading
Keren hishtalmut, explained for olim
The full background on the Israeli benefit with no equivalent in the package you left.
Keren hishtalmut next to an ISA
The Israeli fund set against the tax-free wrapper a UK oleh may already know.
Withdrawing from a keren hishtalmut
What an early withdrawal costs, and what starting a fresh fund looks like.
Related tools
Pension Comparison Tool
Compare your home-country retirement accounts (401k, IRA, SIPP) with Israeli pension vehicles - Keren Pensia and Keren Hishtalmut - and see projected values at retirement.
Gross-to-Net Salary Calculator
See exactly what you take home from your Israeli salary, with olim credit points and US/UK comparison.
Net Worth Snapshot
Add up what you own minus what you owe across your Israeli and home-country accounts, with the pension vehicles olim forget and the FBAR/PFIC catch for US persons.
- Keren hishtalmut and provident-fund tax treatment — Israel Tax Authority gov.il ↗ ↩
- Income Tax Circular 4/2014 (salaried keren hishtalmut salary ceiling) — Israel Tax Authority gov.il ↗ ↩
- Provident and further-education fund regulation — Capital Market, Insurance and Savings Authority gov.il ↗ ↩
- About Form 8621 (Information Return by a Shareholder of a PFIC) — IRS irs.gov ↗ ↩
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