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

In 2026, each income tax credit point in Israel is valued at 242 shekels per month, amounting to 2,904 shekels annually. This tax benefit directly reduces the amount of tax owed, making it especially valuable 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 entitled to an additional half point, totaling 2.75 points. Additional points are granted based on personal circumstances, including parenthood, military service, immigration status, and academic achievements. Parents receive the highest number of points, which vary depending on their children's ages: 2.5 points at birth, increasing to 4.5 points at ages one and two, then decreasing to 3.5 points at age three, and 2.5 points for ages four and five. Children aged six to seventeen grant an extra point per child.

Former soldiers and national service veterans are eligible for credit points for 36 months after discharge, with full service granting two points monthly and shorter service one point. New immigrants receive increased points during a 42-month absorption period, which gradually decreases over time. Graduates also benefit: a bachelor's degree holder receives one point for three years post-graduation, while a master's degree holder gets half a point for two years. Single parents receive an additional point beyond the regular child-related credits.

Taxpayers can accumulate multiple credit entitlements simultaneously and must report their eligibility to employers via Form 101 at the start of each year. Those who have not utilized their full credit points can claim retroactive tax refunds for up to six years. However, credit points only apply against taxable income, so individuals with income below the tax threshold cannot fully benefit from them.

This tax credit system offers significant financial relief, but many workers miss out due to lack of awareness or failure to update their status with employers.