Israel Income tax rates

What are the tax rates in Israel?

Like most other countries, Israel has a progressive income tax system that can often be confusing. Based on the Israel income tax brackets system, different amounts of your income are taxed at different rates. Here’s how it works.

Breaking down the Israel income tax rates brackets

Your income is split into different brackets. Each bracket is taxed at a different rate. As you make more money, your income that falls into the higher brackets are taxed at higher rates. You pay the tax rate applicable to each bracket of income.

Calculate your tax liability?

Our software can calculate how much tax you’ll owe. It’s simple, quick and easy. Just answer a few questions and see your result. Click below to open our income tax calculator.

2021 Income tax rates in Israel

Annual income (NIS)Monthly income (NIS)2021 tax rate
0 - 75,4800 - 6,29010%
75,481 - 108,3606,291 - 9,03014%
108,361 - 173,8809,031 - 14,49020%
173,881 - 241,68014,491 - 20,14031%
241,681 - 502,92020,141 - 41,91035%
502,921 - 647,64041,911 - 53,97047%
647,641 or more53,971 or more50%

So, What does this mean?

Let’s say you have an annual profit from your Osek Murshah of 220,000 ₪ (and no other Income).

Let’s calculate your income tax:

On the first bracket; up to 75,480₪ you pay tax at 10%:
75,480* 10% = 7,548₪ 

Then move into the 2nd bracket, the income between 75,481₪ to 108,360₪ you pay 14%:
32,879 * 14% = 4,603₪

And you keep going until you reach the bracket with 220,000₪. 

So, if you have a high income, you won’t pay income tax at a high rate on all of your income, only the part which falls into the higher tax brackets.

But that’s not all…

In reality, you will pay less Income Tax once your tax credits have been applied. Individual’s are entitled to an annual tax deduction which is calculated based on their personal circumstances. Read our Credit Points Guide for more information.

However, it’s important to remember that in addition to Income Tax calculated using the Israel income tax rates brackets, an עצמאי (self-employed) must also contribute to Bitauch Leumi (National Insurance) and their pension fund.

Incomes taxed at lower tax rates

There are numerous types of incomes which have special tax rates – lower than the rates specified in the tax rates brackets system. For example, tax on dividends can reach a maximum of 25% or 30%. Rental income also has special rates, depending on the location and classification of the real estate. 

You can find more information on this topic in Hebrew on the KolZchut website.

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