Israeli Property Tax Reform Expands Discounts to 100,000 More Households from 2026

Starting in 2026, approximately 100,000 additional Israeli households will qualify for property tax (arnona) discounts due to significant changes in eligibility criteria promoted by the Ministry of Interior. According to an analysis by the Treasury's Chief Economist Department, the number of eligible households will rise from about 740,000 to 840,000, while total discounts based on income testing will increase from 2.2 billion to 3.2 billion shekels. The new model revises income calculation methods and discount rates, correcting previous advantages given to larger households and broadening eligibility to more population groups.

About 91% of households already receiving discounts will see an increase, with only a small fraction experiencing a reduction. The reform will heavily impact local authorities, which are expected to lose around 1.1 billion shekels in revenue, primarily affecting weaker municipalities. In the lowest socioeconomic clusters, revenue losses could reach up to 7% of flexible budgets, funds used for resident services. Significant benefits will also reach middle-income deciles, with eligibility in the second and third deciles rising from 51% to 64%, and moderate increases in deciles four to six.

One reason for the expanded eligibility is that the new calculation excludes certain National Insurance benefits such as child allowances, old-age pensions, survivor benefits, and disabled child benefits. Among the Haredi community, eligibility is projected to increase from 60% to 65%, with an average discount of about 4,600 shekels per household. The Arab sector will see the sharpest rise in eligibility, reaching approximately 53%. The reform does not alter work incentive mechanisms, and eligibility is not contingent on employment or income maximization. Eligibility verification will continue to require manual document submission rather than direct data transfer from National Insurance. Currently, only about 40% of eligible households claim the discount, according to the Treasury.