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The law on tax credits for parents in Israel has been passed: for whom will take-home pay rise, by how much and when?
An important and significant law has finally been passed for parents in Israel.
- What exactly does the law include?
- What is a credit point (Nekoudate Zikouye)?
- What is the salary threshold above which parents will benefit from this advantage?
- Will we already feel the change in the next pay slip?
In this article we will answer questions about the law to increase tax credit points in Israel for parents and to increase the work subsidy (Maanak Avoda).
What does the law include?
The first part of the law concerns, as mentioned, tax credit points for parents in Israel. Each parent will receive one point tax credit throughout 2022 for every child aged 6 to 12.
In the second part, it was decided to increase the Maanak avoda subsidy to encourage people to work. More on this later.ALSO READ: What is Maanak avoda?
Is my child already 12 years old also considered?
Yes. By law, children who turn 12 in 2022 are also eligible, and the bonus is valid for the whole year.
What is a tax credit point - Nekoudate Zikouye?
Israeli residents are entitled to tax credit points, which reduce the amount of income tax they have to pay. The basic entitlement is 2.25 points per tax resident. Each point is worth 223 NIS per month, or 2,676 NIS for a full year. (in 2022).
A woman is entitled to an additional half-point.
So a male Israeli tax resident will be entitled to 2.25 * 2676 = 6,021 Nis tax credit.
A woman will be entitled to 2.75 * 2676 = 7,359 Nis tax credit in Israel.ALSO READ: Understanding how tax credits work in Israel
Watch out!
In Israel, tax is personal and not per tax household.
In this way, each member of the couple benefits from tax advantages independently of the spouse.
I have children in the age bracket concerned. Will I see an increase in my salary?
It depends on how much you earn. An Israeli resident who is not entitled to any other credit points will be able to start enjoying the full benefits, i.e. an extra 223 NIS net per month, if they earn around 7,000 NIS gross per month or more.
A woman residing in Israel who is not entitled to additional credit points will only be able to benefit from the full bonus if she earns NIS 8,000 or more.
On the other hand, a woman earning NIS 6,000 or a man earning NIS 5,000 will not benefit from the advantage at all, as the tax rate they have to pay is lower than the amount of the advantage.
In other words, this advantage only applies to people who are used to paying tax as part of their salary. If your income doesn't exceed the taxable threshold, you won't notice any difference.
Of course, if you have several children of the relevant ages, each one will give you a credit of 223 NIS per month.
For even more convenience, you can download the simulator (in French) from our website, with the link just below.SALARY IN ISRAEL: ONLINE SIMULATION.TAX IN ISRAEL FOR AN OSSEK MOURCHE/PATOUR: ONLINE SIMULATION.
My daughter is 5. What happens then?
For children aged 1 to 5 there is already an extra credit point granted under the current law. The aim of the new law is to extend the bonus to older children.
When will I actually see the credit on the pay slip and how much will it be worth?
Following final approval by the Knesset, the law will come into force this week. Which means you'll already see the law's application on your next pay slip (May 2022).
Since income tax is calculated annually and the bonus is retroactive to January, eligible parents will already be able to receive a substantial amount on their next salary. (Retroactive from January to April).
For example, a father of an 8-year-old child who earns NIS 10,000 gross per month and is not entitled to additional credit points, paid income tax of NIS 686 every month of the year.
Now he's actually entitled to a credit point refund for four months and a tax reduction from May onwards - in total, this represents a benefit of around NIS 1,100. In other words, instead of paying tax of 686 NIS this month, as every month, a negative income tax of 414 NIS will appear on the payslip.
Who is the second part of the law, which increases the work bonus, aimed at?
The second part of the law concerns a work grant (Maanak Avoda bonus), to which salaried employees and Ossek Mourche/Patour earning a relatively low salary are entitled, depending on the number of children in their care.
Currently, the average annual subsidy for rightsholders is NIS 4,000 according to tax administration data, and under the new law, the subsidy will increase by 40 %, so the increase will be NIS 1,600 on average for rightsholders.
Will the benefits of the law continue for years to come?
For the time being, the law has been approved as a temporary provision that relates only to the 2022 tax year, and of course the government has estimated budget increases in the order of 2.5 billion shekels that relate to this year alone.
The government and Knesset members can extend the temporary order if they wish, but this will require legislation.
In a nutshell:
Parents in Israel will really feel a change in their wallet.
Objective :
The bonus of 2,676 Nis per parent and per child aged between 6 and 12 helps to rebalance the burdens faced by parents in Israel.
Your questions - our advice
How can I be sure of receiving the bonus for an employee?
You need to fill in your Tofes 101 taking care to detail the ages of your children.
Tax optimization for a Mourche/Patour ossek
It would be wise to check the instalments paid to Mas Ahnassa for the year 2022.
Our online tracking tool automatically updates our customers' advance payments.
If my employer has forgotten to update my tax credits! Are they lost?
Parents in Israel will have to contact the Israeli tax authorities at the end of the year and ask for a refund of any overpaid taxes!
Will it cost the employer more?
No, this amount is deducted from the employee's net income tax, so it doesn't affect the employer.
