A New Relief Measure for American Olim
One of the significant financial barriers for American Jews considering aliyah has been the double social insurance burden: paying both US Social Security/Medicare taxes (if working for a US employer) and Israeli ביטוח לאומי (Bituach Leumi) on the same income. The 2026 legislation introduces an exemption specifically designed to address this.
Who qualifies for the exemption?
The 2026 exemption applies to American olim (individuals who made aliyah and hold Israeli citizenship or permanent residency) who meet all of the following conditions:
- US employer: You must be employed by - or contracting services to - a US-based company or entity. The employer must have its primary place of business in the United States.
- Work performed for foreign client: The services must be provided to the US employer's non-Israeli operations (not to Israeli clients on behalf of the US employer).
- US social insurance payments: You or your employer must be paying US Social Security and Medicare taxes (FICA) on the same income. If you've claimed FICA exemption, this exemption doesn't apply.
- Status as new oleh: The exemption runs for five years from the aliyah date for a qualifying oleh who is subject to US Social Security. Because the 2026 amendment is administered case by case and details can be refined by regulation, confirm your own eligibility with Bituach Leumi or a cross-border accountant.
What does the exemption cover, and what does it not cover?
The exemption covers the Bituach Leumi national-insurance contribution on employment income from qualifying US employers. Specifically, you will not owe the national-insurance contribution (the part that funds old-age, disability, maternity and the other Bituach Leumi branches) on that income. It does not remove the separate health levy.
It does not cover:
- The health levy (mas briut): the health contribution collected on the same Bituach Leumi statement under the State Health Insurance Law is a different charge and is still owed. Health coverage is compulsory for every Israeli resident, so the national-insurance exemption leaves the health levy fully payable.
- מס הכנסה (Mas Hachnasa) (Israeli income tax) - this still applies on Israeli-resident income after any applicable 10-year exemption period
- VAT obligations if you're structured as self-employed
- Pension and Keren Hishtalmut contributions (these are savings, not social insurance)
- Bituach Leumi national-insurance on Israeli-source income or income from non-US employers
How do you apply for the exemption?
The exemption is not automatic - you must apply and receive confirmation from the National Insurance Institute (Bituach Leumi). The application process involves:
- Submitting documentation of your employment relationship with the US employer, including your employment contract or service agreement
- Evidence that FICA is being paid on the same income (W-2 form, pay stubs, or a letter from your employer)
- Your Teudat Oleh and proof of aliyah date
- A completed exemption application form (available from Bituach Leumi branches and increasingly online through the Bituach Leumi portal)
Once approved, Bituach Leumi issues a formal exemption letter. Keep this letter: if you use a billing company (Atzmai Sachir) or file as Osek Patur, you'll need to present it to ensure Bituach Leumi is not charged on the qualifying income.
Important Caveats
This is a new law as of 2026, and the implementation details - the definition of "US employer," the documentation Bituach Leumi will accept, and the exact income types covered - may be refined through regulations and administrative guidance in the months following enactment. Before relying on the exemption, confirm the current status with an Israeli CPA familiar with olim taxation. The law is beneficial in intent but the details matter for individual situations.
The 2026 Israeli law exempts American olim from paying the Bituach Leumi national-insurance contribution on wage income from a US employer when US Social Security and Medicare taxes (FICA) are already being paid on that same income. It ends the double social insurance burden that arose because there is no US-Israel Totalization Agreement, so olim working for US employers could face both US FICA and the Israeli national-insurance contribution on one paycheck. The exemption is a unilateral Israeli measure: you still owe FICA to the IRS, you simply no longer owe the Bituach Leumi contribution on that income. It applies only to active employment income from a US-based employer for work performed for the employer's non-Israeli operations, and it runs for five years from the aliyah date. Crucially, it removes the national-insurance contribution only and does not remove the separate health levy (mas briut), which every Israeli resident still owes. It also does not cover Israeli income tax (Mas Hachnasa), VAT, pension or Keren Hishtalmut contributions, or national-insurance on Israeli-source income or income from non-US employers. The exemption is not automatic: you must apply to Bituach Leumi with your employment contract, proof of FICA payment (such as a W-2, pay stubs, or an employer letter), and your Teudat Oleh, then keep the formal exemption letter you receive.
It is a 2026 Israeli law that exempts American olim from paying the Israeli Bituach Leumi (National Insurance) contribution on wage income from a US employer when US Social Security and Medicare taxes (FICA) are already being paid on that same income. It was designed to end the double social insurance burden olim faced because there is no US-Israel Totalization Agreement. The exemption applies to active employment income from US employers only, not to self-employment or other income categories, and it removes the national-insurance contribution only, not the separate health levy.
Yes. You still owe US Social Security and Medicare taxes (FICA) to the IRS. The 2026 exemption is a unilateral Israeli measure that only removes the Israeli Bituach Leumi obligation on the same income; it does not require US action and takes effect from the Israeli side only. In fact, the exemption depends on FICA being paid: if you or your employer have claimed a FICA exemption, the Israeli exemption does not apply.
You qualify as an American oleh (someone who made aliyah and holds Israeli citizenship or permanent residency) if you meet all of these conditions: you are employed by, or contracting services to, a US-based company whose primary place of business is in the United States; the services are provided to the US employer's non-Israeli operations rather than to Israeli clients; US Social Security and Medicare taxes (FICA) are being paid on the same income; and you are within five years of your aliyah date. Because the 2026 amendment is administered case by case and details may be refined by regulation, confirm your own eligibility with Bituach Leumi or a cross-border accountant.
The exemption removes only the Bituach Leumi national-insurance contribution on qualifying US-employer wage income. It does NOT remove the separate health levy (mas briut): the health contribution collected on the same Bituach Leumi statement under the State Health Insurance Law is a different charge that every Israeli resident still owes. The exemption also does not cover Israeli income tax (Mas Hachnasa), which still applies on Israeli-resident income after any applicable 10-year exemption period; VAT obligations if you are structured as self-employed; pension and Keren Hishtalmut contributions, which are savings rather than social insurance; or national-insurance on Israeli-source income or income from non-US employers.
The exemption is not automatic. You must apply to the National Insurance Institute (Bituach Leumi) and receive confirmation. The application involves submitting documentation of your employment relationship with the US employer, such as your employment contract or service agreement; evidence that FICA is being paid on the same income, such as a W-2 form, pay stubs, or an employer letter; your Teudat Oleh and proof of aliyah date; and a completed exemption application form, available from Bituach Leumi branches and increasingly online through the Bituach Leumi portal.
Once approved, Bituach Leumi issues a formal exemption letter. Keep this letter, because if you use a billing company (Atzmai Sachir) or file as Osek Patur, you will need to present it so that Bituach Leumi is not charged on the qualifying income.
The UK has a Social Security Totalization Agreement with Israel, which generally prevents UK nationals from paying both UK National Insurance and Israeli Bituach Leumi on the same income. There is no US-Israel Totalization Agreement, so American olim lacked that protection and could face double contributions. The 2026 exemption creates a similar, if narrower, outcome specifically for employment income from US employers.
