New Tax Break for Returning Israelis Opens in 2026

Israel is introducing a new tax incentive for returning citizens, effective in 2026, which will exempt income earned in Israel from income tax for a limited period. This "returning resident" tax break offers exemptions of up to NIS 600,000 in the first year, NIS 1 million in the second, and NIS 1 million in the third year. The window to qualify for this specific benefit is narrow, open only to those who make aliya or return between November 2025 and the end of the 2026 tax year.

After this initial period, the exemption amounts decrease significantly, with NIS 350,000 in 2029 and NIS 150,000 in 2030. Income from relatives is subject to a lower annual ceiling of NIS 140,000 from 2026 to 2029. The total potential exemption over these five years amounts to NIS 3.1 million in qualifying income, with the bulk concentrated in 2027 and 2028.

This new benefit targets income generated within Israel, such as salaries from Israeli employers or business income earned locally. This contrasts with the existing tax benefits for "veteran returning residents," which primarily exempt income earned abroad. To be eligible, individuals must obtain a returning resident certificate from the Ministry of Aliyah and Integration. New immigrants can access this benefit through their immigrant visa, alongside other financial incentives.

The article also details the waiting period for health services, which is calculated based on one month of waiting for every year of absence abroad, capped at six months. Individuals who have continuously paid health insurance premiums while abroad are exempt from this waiting period. Alternatively, the waiting period can be shortened by a one-time payment or six equal installments, totaling NIS 16,860. Minors, recently discharged soldiers, and new immigrants are exempt from this waiting period.

Further provisions include a tax exemption on interest from foreign currency deposits held abroad for five years, provided they are deposited in Israel within 90 days of return. Returning residents also have a 90-day period to declare their choice of not being considered an Israeli resident for their first year back, offering a trial period before their status is finalized.