Israeli Veterans Can Claim Tax Refunds Up to Six Years Back Using Military Service Credits

Israeli military veterans are entitled to two additional tax credit points for 36 months after completing full mandatory service, which can reduce their annual tax by up to 5,808 shekels. However, many new veterans do not reach the income threshold to benefit from these credits in their first jobs, often in sectors like waitressing or customer service. The tax credit points increase the monthly tax-free income threshold from about 5,400 shekels to over 9,300 for men and 10,200 for women, but if earnings remain below these levels, the credits do not reduce taxes further.

A common scenario involves veterans working multiple jobs without coordinating tax credits between employers. In such cases, the secondary employer deducts tax at the maximum rate of 47%, leading to significant overpayment. For example, a veteran named Maya worked simultaneously as a waitress earning 7,000 shekels and in a call center earning 4,000 shekels monthly. Without tax coordination, she paid approximately 22,500 shekels in excess tax over one year, despite her total income being below the threshold after credits.

Veterans can claim refunds for overpaid taxes retroactively for up to six years, including interest and linkage increments. Refund applications require submitting discharge certificates, annual tax forms (106) from all employers, and bank details through the Israeli Tax Authority’s online system, without needing an accountant. The tax credits apply equally to combat soldiers, support personnel, and rear-echelon service members, with distinctions only in other benefits like personal deposits or new reserve combatant credits.

To avoid overpayment, veterans should file a tax coordination (te’um mas) annually to distribute credits among employers. The deadline to claim refunds for 2020 income is the end of 2026. Additional refund opportunities exist for partial-year employment, reserve duty payments taxed at source, independent pension contributions, and first-degree academic credits.

This guidance aims to help veterans maximize their entitled tax benefits and recover substantial sums that may otherwise remain unclaimed.