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The progressive method
Income tax in Israel is defined by the so-called "progressive tax" method.
The progressive method means that the more money a person earns, the higher their tax liability will be.
As you can see from the table below, your tax rate increases as your net taxable income rises.Click here to access our Online Simulator
How to calculate net taxable income
In order to calculate your net taxable income, you need to take into account all the money you have earned in the past year, and deduct from this any exempt income, your tax losses from the current or previous years, and certain deductions allowed by the Israeli tax code.
Tax brackets
Once we have obtained your net taxable income, it will be divided into different levels. Each level will be subject to a different tax percentage (see table below).
These tiers are called "tax brackets" and are updated each year by the tax authorities. Israeli government.
Where does your money come from?
Your tax threshold will differ depending on where your money comes from.
The Israeli government has divided the source of revenue into 2 distinct categories:
- Active income", which comes from the taxpayer's own work (יגיעה אישית), such as a monthly salary.
- Passive income", which does not come from the taxpayer's own work, such as monthly rent.
Each of these sources benefits from different tax brackets and levels, as shown in the tables below:
Tax bracket in Israel :
Here are the tranches for 2023
Annual income (in shekels) | Tax rates | Tax levels | Accumulated taxes |
| 0 - 81,480 | 10% | 8,148 | 8,148 |
| 81,481 - 116,760 | 14% | 4,939 | 13,087 |
| 116,761 - 187,440 | 20% | 14,136 | 27,223 |
| 187,441 - 260,520 | 31% | 22,654 | 49,877 |
| 260,521 - 542,160 | 35% | 98,573 | 148,450 |
| 542,161 - 698,280 | 47% | 73,375 | 221,825 |
| 698,281 and over | 50% |
* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.
Here are the brackets for 2022
Annual income (in shekels) | Tax rates | Tax levels | Accumulated taxes |
| 0 - 77,400 | 10% | 7,740 | 7,740 |
| 77,401 - 110,880 | 14% | 4,687 | 12,427 |
| 110,881 - 178,080 | 20% | 13,440 | 25,867 |
| 178,081 - 247,440 | 31% | 21,501 | 47,368 |
| 247,441 - 514,920 | 35% | 93,618 | 140,986 |
| 514,921 - 663,240 | 47% | 69,711 | 210,697 |
| 663,241 and more | 50% |
* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.
Here are the tranches for 2021
Annual income (in shekels) | Tax rates | Tax levels | Accumulated taxes |
| 0 - 75,480 | 10% | 7,548 | 7,548 |
| 75,481 - 108,360 | 14% | 4,603 | 12,151 |
| 108,361 - 173,880 | 20% | 13,104 | 25,255 |
| 173,881 - 241,680 | 31% | 21,018 | 46,273 |
| 241,681 - 502,920 | 35% | 91,434 | 137,706 |
| 502,921 - 647,640 | 47% | 68,018 | 205,724 |
| 647,641 and over | 50% |
* Passive income (rent, interest, dividends, capital gains, etc.) from an individual under 60 is not eligible for the tax rate in Israel of less than 31%.
Here are the brackets for 2020
Annual income (in Shekels) | Rates taxation | Tax levels | Accumulated taxes |
| 0 - 75,960 | 10% | 7,596 | 7,596 |
| 75,961 - 108,960 | 14% | 4,620 | 12,216 |
| 108,961 - 174,960 | 20% | 13,200 | 25,416 |
| 174,961 - 243,120 | 31% | 21,129 | 46,545 |
| 243,121 - 505,920 | 35% | 91,980 | 138,525 |
| 505,921 - 651,600 | 47% | 68,469 | 206,994 |
| 651,601 + | 50% |
* Passive income (rent, interest, dividends, capital gains, etc.) for an individual under 60 is not eligible for the tax rate in Israel of less than 31%...
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An advantage for seniors.
It is important to note, however, that for a person over 60, the tax brackets for passive income will be the same as for active income.
Example for calculating tax in Israel on active income
The net taxable income of a person, whom we'll call Reuven for our example, is 10,500 Shekels per month. How can Reuven calculate the income tax he has to pay?
- With an income of up to 8,148, he will be in the 1st bracket, which is subject to a tax rate of 10%, so he will have to pay 815 NIS.
- If his income is between 8,149 NIS and 9,730 NIS, he will be in the 2nd tax bracket, subject to 14%, so he will have to pay 221 NIS.
- On income between 9,731 NIS and 10,500 NIS, he will be in the 3rd tax bracket, subject to 20%, and will therefore have to pay 154 NIS.
The total income tax he will have to pay is therefore NIS 1,106/month.
To reduce Reuven's tax bill, we can withdraw any tax credits he may be entitled to.
See also: how Nekoudot Zikouye works.
See also: Pension fund deposit deduction.
