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Israel Raises Tax Exemption Rate on Pension Payments with Key Rules for Maximizing Benefits

How 2 Israeli newsrooms covered this story — translated into English and compared side by side.

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First reported by Mako · Jul 13, 2026

What happened

Israel has increased the tax exemption rate on qualifying pension payments to 57.5% in 2026, with further rises planned. Pensioners must file Form 161D to allocate their exemption between monthly payments and lump sums, as prior tax-exempt severance withdrawals reduce exemption amounts. Careful planning is essential to maximize benefits and avoid costly mistakes.

01Israel raised the 2026 tax exemption rate on qualifying pensions to 57.5%, up from 57% in 2025.
02The monthly exemption ceiling is about 9,430 shekels, allowing a maximum tax-exempt pension of 5,422 shekels.
03Prior tax-exempt severance withdrawals reduce pension exemption via a formula multiplying withdrawn amounts by 1.35.
04Retirees must submit Form 161D to fix rights and allocate exemption between monthly pensions and lump sums.
05Decisions on exemption allocation are nearly irreversible and require professional advice to avoid costly errors.
06The exemption rate will increase to 62.5% in 2027 and 67% in 2028, with ceilings adjusted for inflation.

Summary translated & synthesized from the sources below by baba. Read each original for the full report.

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Anat Gilad