Israel to grant new immigrants two-year income tax exemption

Under the tax reform, new immigrants who make the Jewish state their home and Israelis who return after living abroad for 10 or more years will be charged a zero-percent income tax rate in 2026 and 2027.

By JNS

New Jewish immigrants and citizens moving back to Israel in 2026 will pay no income tax during their first two years in the country, Finance Minister Bezalel Smotrich announced on Thursday.

The tax reform for olim, which is part of next year’s state budget and was first announced during a ceremony at the Jerusalem headquarters of Nefesh B’Nefesh Thursday, seeks to attract immigrants and returning residents from Western nations amid a global surge of antisemitism.

“This is a Zionist and economic revolution,” Smotrich declared, speaking alongside Aliyah and Integration Minister Ofir Sofer.

“Zionism has always relied on three pillars—settlement, security and aliyah,” he added.

“These past two years, we invested heavily in security, and the State of Israel is now in a different place. The year 2026 will be a year of revolution in aliyah not as a slogan, but as a practical work plan.”

Sofer called immigration “of Zionist, social and economic importance to the State of Israel,” emphasizing that aliyah “strengthens our social fabric, brings high-quality human capital and directly contributes to growth, innovation and economic development.”

Under the tax reform, new immigrants who make the Jewish state their home and Israelis who return after living abroad for 10 or more years will be charged a zero-percent income tax rate in 2026 and 2027.

Their tax rate will then gradually increase to 10% in 2028, 20% in 2029 and 30% in 2030 (according to income levels within the tax brackets).

The discounted rates will apply up to an annual income cap of 1 million shekels (about $305,000), and will be added to existing incentives for immigrants, including a 10-year exemption on taxes from passive foreign income and other tax credits, the Finance Ministry said.

Since Jan. 1, 2022, olim have been eligible for 4.5 years of tax credits—one in the first year, three over the next 18 months, two in the following year, and one during the final year. In 2024, each tax credit was worth 242 shekels ($65) per month, or around 2,904 shekels ($780) per year.

Since the Hamas-led massacre that sparked a seven-front war on Oct. 7, 2023, more than 50,000 new immigrants have arrived in the Jewish state, according to figures published ahead of Rosh Hashanah in September.

Amid the ongoing fighting, over 31,000 immigrants made Israel their home in 2024—a 31% decrease compared to the previous year.