Israel’s Interior Ministry Expands Property Tax Discounts to 100,000 More Households by 2026

The Israeli Interior Ministry announced a reform to the property tax (arnona) discount system, set to take effect in 2026, which will extend eligibility to approximately 100,000 additional households. This change, based on income rather than household size, aims to correct previous biases favoring larger families. The number of eligible households will rise from 740,000 to 840,000, a 13% increase, while total discounts are expected to grow by 49%, from 2.2 billion to 3.2 billion shekels.

Under the new regulations, about 91% of households already receiving discounts will benefit from higher rates, with the average discount rate increasing by 25 percentage points. Nearly 60% of all discounts will be at the highest level of 90%. However, local authorities are projected to lose around 1.1 billion shekels in revenue, disproportionately impacting weaker municipalities. For example, municipalities in the lowest socioeconomic cluster could see a 7% reduction in their flexible budgets, which fund public services.

Geographically, the central region will maintain mostly single-digit discount rates relative to flexible budgets, while areas like Nazareth and Acre will experience a roughly 10 percentage point increase. The reform also benefits middle-income groups, with eligibility rising significantly in the second and third income deciles. The calculation excludes certain National Insurance benefits, such as child and elderly allowances, enabling some households to qualify for higher discounts despite higher reported incomes.

Among population groups, the ultra-Orthodox community has the highest eligibility rate, increasing from 60% to 65%, with an average discount of about 4,600 shekels. The Arab community saw the largest rise in eligibility, up by 7 percentage points to 53%. The reform does not change the eligibility verification process, which remains manual and does not link directly to National Insurance income data. Currently, only about 40% of eligible households claim the discount. The ministry noted that reducing discount rates by 5 percentage points could save 250 million shekels, while lowering income thresholds would reduce benefits for non-poor populations.