Israel Updates Tax Form for Early Pension Withdrawals Based on Low Income
Israel's Tax Authority updated Form 159A on October 26, 2025, to reflect new income thresholds for individuals seeking to withdraw pension funds before the age of 60. Typically, early withdrawals incur a 35% tax or the individual's marginal tax rate, whichever is higher. However, pension fund regulations allow an exception for those with low income.
Starting April 2026, the minimum wage for a full-time job will be approximately NIS 6,444 per month. This figure serves as the new income threshold. For single individuals or couples whose children are all 18 or older, the monthly income limit is set at around NIS 6,444. For those with at least one child under 18, the threshold is doubled to approximately NIS 12,888 per month.
To apply, individuals submit the request to their pension fund, not directly to the tax assessor. The applicant must declare their total monthly income, including their spouse's income from all sources, within 60 days of the end of the chosen month. This chosen month can be one of the two preceding the application month. For example, an application in February could be based on income from January or December.
The amount that can be withdrawn is the difference between the income threshold and the applicant's actual income, multiplied by three. For instance, someone earning NIS 4,000 with a threshold of NIS 6,444 can withdraw up to NIS 2,444 per month, totaling up to NIS 7,332 for a three-month period. A family with a child earning NIS 8,000 against a NIS 12,888 threshold can withdraw up to NIS 4,888 monthly, or NIS 14,664 for three months.
This withdrawal reduces the accumulated savings for retirement. The Tax Authority advises that this option is best suited for months with genuinely low income, rather than as a substitute for a loan against the principal. A separate process, Form 159, exists for withdrawals due to severe medical disability (75% or more) or high medical expenses, which involves the tax assessor directly.
