Israeli Income Tax Credit Points Offer Thousands of Shekels in Annual Savings

In 2026, the value of one income tax credit point in Israel is set at 242 shekels per month, totaling 2,904 shekels annually. This tax credit directly reduces the amount of tax owed, making it particularly beneficial for lower-income earners who can potentially eliminate their tax liability entirely. For example, an employee entitled to three credit points can save approximately 8,712 shekels per year.

Every Israeli resident receives a basic allocation of 2.25 credit points, with women receiving an additional half point, totaling 2.75 points. Additional points are granted based on personal circumstances, including parenthood, military service, immigration status, academic degrees, and single parenthood. Parents receive the highest number of points, which vary by the child’s age: 2.5 points at birth, increasing to 4.5 points at ages one and two, then decreasing gradually through age five. Children aged six to seventeen also grant an additional point per child.

Military veterans receive credit points for up to 36 months after discharge, with full service granting two points monthly (worth about 484 shekels) and shorter service granting one point. New immigrants benefit from increased points during a 42-month absorption period, which decreases over time. Graduates with a bachelor's degree receive one point for three years post-graduation, while master's degree holders receive half a point for two years. Single parents are entitled to an extra point beyond the regular child-related credits.

Taxpayers can combine multiple credit entitlements simultaneously. Those who have not updated their employer about their eligibility may miss out on these benefits but can claim retroactive tax refunds for up to six years. Eligibility and updates are reported annually via the employer’s Form 101. However, individuals with income below the taxable threshold cannot fully utilize their credit points since the credits only apply against actual tax owed.