Israel follows a progressive income taxation system, where the more a person earns, the higher the percentage of tax they pay. This system is updated annually, with the income tax brackets adjusted accordingly. The income tax rates apply to annual income, not monthly earnings, which can sometimes create confusion. Below, we’ll explore the key aspects of the income tax system in Israel for 2024.

What Are Income Tax Brackets?

The taxable income—a person’s income after deductions, offsets, and exemptions—is divided into brackets. Each tax bracket represents a portion of income that is taxed at a particular rate, with the rates increasing as the income rises. These tax brackets ensure that individuals with higher incomes pay a higher proportion of their income in taxes. The purpose of this system is to balance earnings, ensuring that net income increases progressively as gross income grows. Additionally, there is a distinction between income earned through personal work and income from other sources, such as rental income. Different tax brackets and rates apply depending on the type of income.

Examples of Personal Income

– Salary from employment – Business income – Pension allowances (including disability pensions) – Retirement grants For more details on what constitutes personal income, see the official tax authority website.

2024 Tax Brackets for Personal Income

Annual Income	Monthly Income (Illustrative)	Tax Rate
Up to NIS 84,120	Up to NIS 7,010	10%
NIS 84,121 – NIS 120,720	NIS 7,011 – NIS 10,060	14%
NIS 120,721 – NIS 193,800	NIS 10,061 – NIS 16,150	20%
NIS 193,801 – NIS 269,280	NIS 16,151 – NIS 22,440	31%
NIS 269,281 – NIS 560,280	NIS 22,441 – NIS 46,690	35%
NIS 560,281 – NIS 721,560	NIS 46,691 – NIS 60,130	47%
Above NIS 721,561	Above NIS 60,131	50%*

*According to Section 121b, an additional 3% tax applies to annual income exceeding NIS 721,560, bringing the total tax rate to 50%.

How Are Tax Rates Calculated?

The tax brackets are based on annual income, meaning that tax calculations reflect total earnings over the course of the year, not month-by-month fluctuations. For employees, taxable income is the full gross income, while for self-employed individuals, it is gross income minus allowable deductions, offsets, and exemptions. For example: —> An employee earning NIS 15,000 per month will pay:

• • 10% on the first NIS 7,010 (NIS 701),
  • 14% on the next NIS 3,049 (NIS 426.86),
  • 20% on the remaining NIS 4,939 (NIS 987.80).
  • Total monthly tax: NIS 2,115.66.

Tax Rates for Non-Personal Income

Non-personal income refers to earnings that are not derived directly from a person’s work or business activities. For Example: Rental or investments income.

Annual Income	Monthly Income (Illustrative)	Tax Rate
Up to NIS 269,280	Up to NIS 22,440	31%
NIS 269,281 – NIS 560,280	NIS 22,441 – NIS 46,690	35%
NIS 560,281 – NIS 721,560	NIS 46,691 – NIS 60,130	47%
Above NIS 721,561	Above NIS 60,131	50%

In my next blog, I will explore income tax credits, which help reduce tax liabilities for various individuals depending on factors such as family status, residency, and more. Stay tuned!