Israeli Reserve Soldiers Face Loss of Property Tax Discount Amidst Delays by Interior Ministry

Reserve soldiers in Israel risk losing their eligibility for property tax discounts in 2026 due to delays by the Interior Ministry in formalizing the exemption rules. The exemption, which excludes reserve duty pay from income calculations for tax discount eligibility, was temporarily authorized for 2024-2025 following a Supreme Court petition by the Awakening Movement. However, this temporary order was not extended for 2026, and the Interior Ministry, controlled by the Shas party, has yet to confirm the policy for the current year. Adir Schwartz, Deputy Mayor of Jerusalem and chairman of the Awakening Movement, urged Interior Ministry Director-General Israel Ozen to urgently finalize the exemption, calling the current situation "absurd" as reservists lose benefits despite their service sacrifices.

New data from the Treasury's Chief Economist reveals that the recent property tax reform, led by the Interior Ministry, disproportionately benefits the ultra-Orthodox community. The reform increased the overall cost of tax discounts by 49%, reaching approximately 3.2 billion shekels. Eligibility for discounts in the ultra-Orthodox sector rose from 60% to 65%, with an average discount of about 4,600 shekels per household, higher than any other group. The Arab sector also saw an increase in eligibility to 53%, while the middle class rose from 18% to 20%. The Treasury report notes that the new model imposes no employment or income utilization conditions for receiving discounts, placing financial strain on weaker local authorities that may lose significant portions of their regular budgets.

The Interior Ministry stated that it defines the maximum discount rate, but local authorities have discretion over the actual discount granted. The delay in formalizing the exemption for reservists comes amid political instability following the resignation of Shas ministers, including former Interior Minister Moshe Arbel. Meanwhile, Director-General Ozen recently took independent action by enforcing a ban on opening businesses on Shabbat at a shopping center without ministerial approval, demonstrating some administrative initiative despite the leadership vacuum.