If you have been on the fence about making aliyah, the Israeli government just removed one of the biggest financial barriers. New immigrants and returning residents who move to Israel in 2026 will pay zero percent income tax on their Israeli earnings for the first two years, followed by a gradual phase-in through 2030. It is, by any measure, the most generous tax benefit Israel has ever offered to new olim.
Who Qualifies
The benefit applies to new immigrants and returning residents who have lived outside of Israel for at least ten consecutive years and who made aliyah or returned to Israel on or after November 5, 2025, through the end of 2026. If you moved back to Israel during the war but had been gone for ten or more years, you may be eligible. Olim who had been living in Israel for at least 183 days a year prior to their official aliyah date will be considered existing tax residents and will not qualify.
The Tax Rates Year by Year
The benefit applies only to income earned in Israel, including salaries and self-employed business income. It does not apply to passive income such as rental income, dividends, or accrued interest. The exemption ceilings vary by year:
- 2026: 0% on Israeli income up to ₪600,000 (approximately $206,000 / €176,000)
- 2027: 0% on Israeli income up to ₪1,000,000 (approximately $343,000 / €294,000)
- 2028: 0% on Israeli income up to ₪1,000,000 (approximately $343,000 / €294,000)
- 2029: 20% on Israeli income up to ₪350,000 (approximately $120,000 / €103,000)
- 2030: 30% on Israeli income up to ₪150,000 (approximately $51,000 / €44,000)
One important caveat: if an oleh is employed by a relative, the exemption is capped at ₪140,000 per year regardless of which tax year applies.
This Is on Top of Existing Benefits
The 0% reform does not replace existing olim benefits. It stacks on top of them. New olim still receive the long-standing ten-year exemption from taxation on foreign-sourced income, including dividends, rental income from properties abroad, capital gains, and pension distributions. That means an oleh who maintains investments or property overseas while working in Israel could simultaneously owe nothing on foreign income for a decade and nothing on Israeli income for the first two years.
For American olim, there is a significant additional consideration. The United States taxes its citizens on worldwide income regardless of where they live. However, the Foreign Earned Income Exclusion allows qualifying taxpayers to exclude up to approximately $132,000 in earned income annually. With careful planning, some American olim may be able to structure their situation to minimize or eliminate tax liability in both countries simultaneously. This requires working with a cross-border tax advisor who understands both Israeli and U.S. tax law.
The New Reporting Requirements
One major change that comes with the 2026 reforms is the end of the reporting exemption that had existed for decades. Starting in 2026, new olim and returning residents are required to report their worldwide income and foreign assets to the Israel Tax Authority from day one, even if those assets remain exempt from Israeli taxation under the ten-year foreign income rule. That means foreign bank accounts, investment portfolios, real estate holdings, trusts, and business interests all need to be disclosed. The exemption from tax remains intact; the exemption from reporting does not.
The Shekel Factor
Worth noting for anyone doing the math from a U.S. or European perspective: the shekel has strengthened dramatically over the past year. The dollar has dropped roughly 18-19% against the shekel over the past twelve months, with the current USD/ILS rate sitting around 2.91. The euro is similarly down against the shekel, currently trading around 3.40. That means Israeli salaries denominated in shekels look meaningfully larger in dollar and euro terms than they did a year or two ago, which adds real value to a tax exemption that is itself shekel-denominated.
Is This Actually a Done Deal
The Knesset Finance Committee has advanced the bill and it is moving through the legislative process. The framework was unveiled in November 2025 as part of the 2026 state budget announcement, with Finance Minister Bezalel Smotrich calling it a “Zionist and economic revolution.” The Knesset advanced the bill through committee in early 2026. Anyone making long-term aliyah planning decisions based on this benefit should confirm the final legislative status with a qualified Israeli tax advisor before making irreversible moves.
Why Now
The timing is not accidental. Israel is actively competing for high-earning Jewish professionals from North America and Western Europe at a moment when antisemitism is rising and tax burdens in countries like the UK are increasing. The government has also introduced parallel programs including a revised housing grant of up to ₪1,500 per month for two years, accelerated professional licensing for new immigrants, and an exemption from double-paying National Insurance for self-employed U.S. olim who are already paying Social Security.
For the average kosher family considering aliyah from the New York area, California, or the UK, the combined package of zero income tax, foreign income exemption, housing support, and streamlined professional licensing represents a meaningful financial runway during the hardest part of absorption. That does not make aliyah simple, but it does make it significantly less financially punishing than it has historically been.
For full details and up-to-date information as the legislation is finalized, visit the Israel Tax Authority website or the Ministry of Aliyah and Integration at ofekisraeli.org.
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