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 is available during the first several years after aliyah — the precise time window is defined in the legislation and should be confirmed with an Israeli accountant, as the specific duration may be adjusted by regulation.
What the Exemption Covers — and What It Doesn't
The exemption covers Bituach Leumi contributions on employment income from qualifying US employers. Specifically, you will not owe Bituach Leumi (or the health levy component administered by Bituach Leumi) on that income.
It does not cover:
- 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 on Israeli-source income or income from non-US employers
How to Apply
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 — specific qualifying periods, definition of "US employer," 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.