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v10Israel
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| 1 | --- |
| 2 | name: il-income-tax-returns |
| 3 | description: Use this skill when preparing, reviewing, or advising on Israeli annual income tax returns. Trigger on phrases like "doch shnati", "Form 1301", "Form 1214", "דוח שנתי", "mas hachnasa", "income tax Israel", "nekudot zikui", "נקודות זיכוי", "tax brackets Israel", "mas yesafim", "מס יסף", "surtax Israel", "mikdamot", "מקדמות", "Mas Shevach", "מס שבח", "capital gains Israel", "Form 6111", "Form 856", "Form 126", or any Israel income tax return query. ALWAYS read this skill before advising on Israeli income tax returns. |
| 4 | version: 1.0 |
| 5 | jurisdiction: IL |
| 6 | tax_year: 2025-2026 |
| 7 | category: international |
| 8 | --- |
| 9 | |
| 10 | # Israel Income Tax Returns Skill v1.0 |
| 11 | |
| 12 | > **Based on work by [Skills IL](https://github.com/skills-il/tax-and-finance)**, licensed under MIT. Adapted for the OpenAccountants format. |
| 13 | |
| 14 | --- |
| 15 | |
| 16 | ## Section 1 — Quick reference |
| 17 | |
| 18 | | Field | Value | |
| 19 | |---|---| |
| 20 | | Country | Israel (מדינת ישראל) | |
| 21 | | Scope | Annual income tax returns for individuals and companies | |
| 22 | | Currency | NIS (Israeli New Shekel — ₪) | |
| 23 | | Tax authority | Israel Tax Authority (ITA — Reshut HaMisim — רשות המיסים) | |
| 24 | | Filing portal | Shaam Online — https://www.misim.gov.il | |
| 25 | | Individual return | Form 1301 (דוח שנתי ליחיד) | |
| 26 | | Short return (salaried refund) | Form 135 (דוח שנתי מקוצר) | |
| 27 | | Corporate return | Form 1214 (דוח שנתי לחברה) | |
| 28 | | Corporate tax rate | 23% flat | |
| 29 | | Surtax threshold | NIS 721,560 (frozen 2025–2027) | |
| 30 | | Credit point value | NIS 2,904/year (NIS 242/month) — frozen 2025–2027 | |
| 31 | | Contributor | Open Accountants Community | |
| 32 | | Validated by | Pending — requires sign-off by Israel-licensed רואה חשבון or יועץ מס | |
| 33 | |
| 34 | ### Conservative defaults |
| 35 | |
| 36 | | Ambiguity | Default | |
| 37 | |---|---| |
| 38 | | Unknown filing obligation | Assume filing is required | |
| 39 | | Unknown bracket year | Use the most recent confirmed brackets | |
| 40 | | Unknown credit points | Apply base resident points only (2.25 male / 2.75 female) | |
| 41 | | Unknown rental income track | Apply marginal rate (most conservative; highest potential tax) | |
| 42 | | Unknown capital gains holding period | Apply 25% rate (no reduced rate exists in Israel regardless) | |
| 43 | |
| 44 | --- |
| 45 | |
| 46 | ## Section 2 — Return types and deadlines |
| 47 | |
| 48 | | Form | Hebrew | Who files | Deadline | Frequency | |
| 49 | |---|---|---|---|---| |
| 50 | | 1301 | דוח שנתי ליחיד | Individuals, sole proprietors, freelancers | June 30 online; May 31 paper (for tax year 2025 filed in 2026) | Annual | |
| 51 | | 135 | דוח שנתי מקוצר | Salaried individuals claiming a refund | Within 6 years of the tax year end (Section 160) | On demand | |
| 52 | | 1214 | דוח שנתי לחברה | Companies (Chevra Ba'am, Chevra Pratit) | May 31 (5 months after year end); extensions available | Annual | |
| 53 | | 126 | דוח מעסיק על משכורות | Employers reporting employee salaries | April 30 | Annual | |
| 54 | | 856 | דוח על תשלומים לספקים | Businesses reporting payments to suppliers | April 30 | Annual | |
| 55 | | 6111 | דוח כספי אחיד | Businesses with turnover > NIS 300,000 (incl. VAT) | Submitted with 1301 or 1214 | Annual | |
| 56 | | Mikdamot | מקדמות מס הכנסה | Self-employed and businesses with advance assessments | 15th of the month after the period | Bi-monthly | |
| 57 | | Mas Shevach | הצהרת מס שבח | Anyone selling real estate in Israel | 30 days from sale (40 days if requesting exemption) | Per transaction | |
| 58 | | 1322/1325 | דוח רווח הון מניירות ערך | Anyone with securities capital gains | 30 days from sale (or annually with Form 1301) | Per transaction or annual | |
| 59 | |
| 60 | **CPA-represented filers** typically receive automatic extensions through the CPA association's quota arrangement with the ITA (often to September 30 or later). |
| 61 | |
| 62 | --- |
| 63 | |
| 64 | ## Section 3 — Who must file Form 1301 |
| 65 | |
| 66 | - Self-employed individuals (Osek Murshe or Osek Patur) |
| 67 | - Individuals whose gross salary exceeded NIS 721,560 (surtax threshold) |
| 68 | - Individuals with income from multiple employers |
| 69 | - Individuals with foreign income or assets abroad exceeding reporting thresholds |
| 70 | - Anyone who received capital gains during the tax year |
| 71 | - Individuals who received rental income exceeding the exempt threshold |
| 72 | |
| 73 | --- |
| 74 | |
| 75 | ## Section 4 — Income tax brackets (2026) |
| 76 | |
| 77 | Brackets 1–2 and 6 frozen at 2025 values; brackets 3–5 expanded by the Economic Efficiency Law 2026 (approved March 30, 2026, retroactive to January 1, 2026): |
| 78 | |
| 79 | | Bracket | Annual income range (NIS) | Rate | |
| 80 | |---|---|---| |
| 81 | | 1 | 0 – 84,120 | 10% | |
| 82 | | 2 | 84,121 – 120,720 | 14% | |
| 83 | | 3 | 120,721 – 228,000 | 20% | |
| 84 | | 4 | 228,001 – 301,200 | 31% | |
| 85 | | 5 | 301,201 – 560,280 | 35% | |
| 86 | | 6 | 560,281 – 721,560 | 47% | |
| 87 | | Surtax | Above 721,560 | See Section 5 | |
| 88 | |
| 89 | ### Monthly equivalent brackets |
| 90 | |
| 91 | | Monthly income (NIS) | Rate | |
| 92 | |---|---| |
| 93 | | Up to 7,010 | 10% | |
| 94 | | 7,011 – 10,060 | 14% | |
| 95 | | 10,061 – 19,000 | 20% | |
| 96 | | 19,001 – 25,100 | 31% | |
| 97 | | 25,101 – 46,690 | 35% | |
| 98 | | 46,691 and above | 47% | |
| 99 | |
| 100 | --- |
| 101 | |
| 102 | ## Section 5 — Surtax (Mas Yesafim — מס יסף) |
| 103 | |
| 104 | Two-tier system from 2026: |
| 105 | |
| 106 | | Income type | Rate above NIS 721,560 | Effective top rate | |
| 107 | |---|---|---| |
| 108 | | Employment and active income | 3% | 50% (47% + 3%) | |
| 109 | | Capital and passive income (dividends, interest, rent, capital gains) | 5% (3% base + 2% additional) | 30% (25% + 5%) for capital gains | |
| 110 | |
| 111 | From 2026, Mas Shevach (real estate capital gains) on investment properties is included in the surtax income calculation. |
| 112 | |
| 113 | The NIS 721,560 threshold is frozen through tax year 2027 — do not apply CPI uplifts. |
| 114 | |
| 115 | --- |
| 116 | |
| 117 | ## Section 6 — Nekudot Zikui (נקודות זיכוי — Tax credit points) |
| 118 | |
| 119 | Each point reduces the annual tax liability by NIS 2,904 (approximately NIS 242/month). Frozen 2025–2027. |
| 120 | |
| 121 | | Category | Points | Notes | |
| 122 | |---|---|---| |
| 123 | | Israeli resident (male) | 2.25 | Base entitlement | |
| 124 | | Israeli resident (female) | 2.75 | Base (0.5 additional) | |
| 125 | | New immigrant (Oleh Chadash — עולה חדש) | 3.0 year 1, 2.0 year 2, 1.0 year 3 | For 3.5 years from Aliyah date (post-2022: 8.5 points over 54 months) | |
| 126 | | Returning resident (Toshav Chozer — תושב חוזר) | Same as Oleh Chadash | After 10+ years abroad | |
| 127 | | Child born during tax year | 1.5 | Per child | |
| 128 | | Children aged 1–5 | 2.5 per child | Per child | |
| 129 | | Children aged 6–17 | 1.0 per child | Per child | |
| 130 | | Child aged 18 | 0.5 | Last year of child credit | |
| 131 | | Single parent | 1.0 | Divorced, widowed, or separated with custody | |
| 132 | | Academic degree (BA) | 1.0 | Per year, up to 3 years matching study duration (graduates 2023+) | |
| 133 | | Academic degree (MA) | 0.5 | For 2 years after completion (graduates 2023+) | |
| 134 | | Vocational certificate | 1.0 | Per year, up to 3 years matching study duration (graduates 2023+) | |
| 135 | | Disability (100% or blind) | 2.0 | Permanent | |
| 136 | | Combat reserve soldiers | 0.5–1.0 | Based on reserve days (from 2026: 0.5 for 20+ days, 0.75 for 45+, 1.0 for 60+) | |
| 137 | |
| 138 | ### Worked example |
| 139 | |
| 140 | Married woman (2.75 points) with two children aged 3 and 7 (2.5 + 1.0 = 3.5 points): |
| 141 | - Total: 6.25 points × NIS 2,904 = **NIS 18,150** annual tax reduction |
| 142 | |
| 143 | --- |
| 144 | |
| 145 | ## Section 7 — Pension contribution credits |
| 146 | |
| 147 | ### 7.1 Section 45א — 35% tax credit (Zikui) |
| 148 | |
| 149 | - Reduces tax liability directly by 35% of qualifying pension contribution |
| 150 | - Applies to both employees and self-employed |
| 151 | - Employee ceiling: qualifying contribution up to 7% of eligible salary (capped at NIS 23,232/month for 2026) |
| 152 | - Self-employed ceiling: 5.5% of business income |
| 153 | |
| 154 | ### 7.2 Section 47 — Pension deduction (Nikui) |
| 155 | |
| 156 | - Reduces taxable income by the contribution amount |
| 157 | - Self-employed can deduct up to 11% of annual business income (capped at qualifying ceiling) |
| 158 | - Employee contributions above the 7% Section 45א threshold can qualify |
| 159 | |
| 160 | ### 7.3 Combined rule |
| 161 | |
| 162 | The same shekel cannot double-count. Self-employed filers typically structure deposits so part qualifies for 45א (credit) and part for 47 (deduction) within the 16.5% combined ceiling. |
| 163 | |
| 164 | ### Worked example (self-employed, NIS 300,000 annual income) |
| 165 | |
| 166 | | Benefit | Calculation | |
| 167 | |---|---| |
| 168 | | Pension deposit | NIS 33,000 (11% of income) | |
| 169 | | Section 47 deduction | Reduces taxable income by up to NIS 33,000 | |
| 170 | | Section 45א credit | 35% of up to 5.5% of income = up to NIS 16,500 eligible → NIS 5,775 direct tax reduction | |
| 171 | |
| 172 | --- |
| 173 | |
| 174 | ## Section 8 — Rental income tax tracks |
| 175 | |
| 176 | Israeli law offers three options for taxing residential rental income: |
| 177 | |
| 178 | | Track | Rate | Conditions | |
| 179 | |---|---|---| |
| 180 | | Exempt | 0% | Monthly rent below NIS 5,654/month (2025–2027, frozen, no longer CPI-indexed) | |
| 181 | | Flat rate | 10% | On gross rent, no deductions allowed. Payment by January 31 of following year | |
| 182 | | Marginal | Progressive rates (10%–50%) | Full deduction of expenses (depreciation, mortgage interest, maintenance). Filed with Form 1301 | |
| 183 | |
| 184 | --- |
| 185 | |
| 186 | ## Section 9 — Capital gains |
| 187 | |
| 188 | ### 9.1 Real estate (Mas Shevach — מס שבח) |
| 189 | |
| 190 | **Filing:** Within 30 days of sale (40 days if requesting exemption). |
| 191 | |
| 192 | **Calculation:** |
| 193 | ``` |
| 194 | Sale price |
| 195 | − Original purchase price (adjusted for CPI) |
| 196 | − Allowable deductions (purchase tax paid, legal fees, agent commission, renovation costs with receipts) |
| 197 | = Real capital gain (Shevach Re'ali — שבח ריאלי) |
| 198 | × 25% tax rate |
| 199 | = Mas Shevach payable |
| 200 | ``` |
| 201 | |
| 202 | **Single apartment exemption (Ptur Dira Yechida — פטור דירה יחידה):** |
| 203 | - Seller's only residential property in Israel |
| 204 | - Owned for at least 18 months |
| 205 | - Sale price below NIS 5,008,000 (2024–2027, frozen) |
| 206 | - Seller is an Israeli resident |
| 207 | - Partial exemption applies proportionally above the ceiling |
| 208 | |
| 209 | **Linear method (Shita Liniarit — שיטה ליניארית):** |
| 210 | For properties purchased before January 7, 2014, only the portion of gain attributable to the period after that date is taxed at 25%. The pre-2014 portion may be exempt or taxed at a lower historical rate. |
| 211 | |
| 212 | ### 9.2 Securities (Forms 1322/1325) |
| 213 | |
| 214 | - 25% tax rate for individuals on traded securities |
| 215 | - 30% if seller holds 10%+ of the company |
| 216 | - Losses can offset gains within the same category in the same tax year |
| 217 | - Capital losses carry forward to offset future capital gains (but not ordinary income) |
| 218 | |
| 219 | --- |
| 220 | |
| 221 | ## Section 10 — Advance tax payments (Mikdamot — מקדמות) |
| 222 | |
| 223 | ### 10.1 How they work |
| 224 | |
| 225 | - The ITA sets a percentage rate based on prior year returns |
| 226 | - Applied to bi-monthly turnover (total revenue excluding VAT) |
| 227 | - New businesses receive a percentage based on industry statistics |
| 228 | |
| 229 | ### 10.2 Payment schedule |
| 230 | |
| 231 | | Period | Months | Payment due | |
| 232 | |---|---|---| |
| 233 | | 1 | January – February | March 15 | |
| 234 | | 2 | March – April | May 15 | |
| 235 | | 3 | May – June | July 15 | |
| 236 | | 4 | July – August | September 15 | |
| 237 | | 5 | September – October | November 15 | |
| 238 | | 6 | November – December | January 15 | |
| 239 | |
| 240 | ### 10.3 Year-end reconciliation |
| 241 | |
| 242 | - Mikdamot paid > actual tax → refund (Hechzer Mas — החזר מס) |
| 243 | - Mikdamot paid < actual tax → difference owed (plus possible interest) |
| 244 | - Rate adjustment available mid-year if income changes significantly (Shinui Shiur Mikdamot — שינוי שיעור מקדמות) |
| 245 | |
| 246 | --- |
| 247 | |
| 248 | ## Section 11 — Corporate tax |
| 249 | |
| 250 | | Item | Rate / rule | |
| 251 | |---|---| |
| 252 | | Corporate tax rate | 23% flat on taxable profits | |
| 253 | | Closely held company (Chevra Me'atim — חברה מעטים) | 2% annual tax on accumulated undistributed profits unless 6%+ distributed as dividends | |
| 254 | | Form 6111 | Required for turnover > NIS 300,000 (including VAT) | |
| 255 | | Deadline | May 31 (extensions available) | |
| 256 | |
| 257 | --- |
| 258 | |
| 259 | ## Section 12 — Form 6111 (standardized financial statements) |
| 260 | |
| 261 | Required for any business with annual turnover exceeding NIS 300,000 (including VAT). |
| 262 | |
| 263 | **Section A: Profit and Loss Statement** |
| 264 | - Revenue by source, COGS, operating expenses, financial income/expenses, depreciation, net profit, tax adjustments |
| 265 | |
| 266 | **Section B: Balance Sheet** |
| 267 | - Current assets, fixed assets, current liabilities, long-term liabilities, equity |
| 268 | |
| 269 | All amounts in NIS. Must match audited financial statements exactly. Submitted electronically via Shaam. |
| 270 | |
| 271 | --- |
| 272 | |
| 273 | ## Section 13 — Filing via Shaam online portal |
| 274 | |
| 275 | 1. Register at misim.gov.il with Teudat Zehut (תעודת זהות) or company number |
| 276 | 2. Set up digital credentials (username + password + 2FA) |
| 277 | 3. Select the relevant form and tax year |
| 278 | 4. Enter data or upload from accounting software |
| 279 | 5. System validates data and flags errors |
| 280 | 6. Review calculated tax liability |
| 281 | 7. Submit electronically (receive confirmation number) |
| 282 | 8. Pay any tax owed via the payment portal |
| 283 | |
| 284 | **CPA authorization (Yipui Koach — ייפוי כוח):** Granted per-client, per-year via the Shaam portal. Allows CPA to submit returns and communicate with the ITA on behalf of the client. |
| 285 | |
| 286 | --- |
| 287 | |
| 288 | ## Section 14 — Worked examples |
| 289 | |
| 290 | ### Example 1 — Freelancer annual return (Form 1301) |
| 291 | |
| 292 | **Scenario:** Male freelance developer (Osek Murshe), annual business revenue NIS 450,000, business expenses NIS 80,000, two children aged 4 and 8. |
| 293 | |
| 294 | **Working:** |
| 295 | - Net business income: NIS 450,000 − NIS 80,000 = NIS 370,000 |
| 296 | - Credit points: 2.25 (resident) + 2.5 (child age 4) + 1.0 (child age 8) = 5.75 points |
| 297 | - Tax credit: 5.75 × NIS 2,904 = NIS 16,698 |
| 298 | - Income tax (applying 2026 brackets to NIS 370,000): |
| 299 | - 10% on 84,120 = NIS 8,412 |
| 300 | - 14% on 36,600 = NIS 5,124 |
| 301 | - 20% on 107,280 = NIS 21,456 |
| 302 | - 31% on 73,200 = NIS 22,692 |
| 303 | - 35% on 68,800 = NIS 24,080 |
| 304 | - **Gross tax: NIS 81,764** |
| 305 | - Less credit points: NIS 81,764 − NIS 16,698 = **NIS 65,066 income tax** |
| 306 | - Less mikdamot paid during year → net tax due or refund |
| 307 | |
| 308 | ### Example 2 — Real estate capital gains (Mas Shevach) |
| 309 | |
| 310 | **Scenario:** Investment apartment sold for NIS 2,800,000, purchased in 2018 for NIS 1,600,000. |
| 311 | |
| 312 | **Working:** |
| 313 | - Gross gain: NIS 2,800,000 − NIS 1,600,000 = NIS 1,200,000 |
| 314 | - Adjust for CPI change from 2018 to sale date |
| 315 | - Deduct allowable expenses (purchase tax, legal fees, agent commission, documented renovation) |
| 316 | - Real gain × 25% = Mas Shevach payable |
| 317 | - File within 30 days of sale |
| 318 | - Check surtax: if total annual income exceeds NIS 721,560, additional 5% on capital gain portion above threshold |
| 319 | |
| 320 | --- |
| 321 | |
| 322 | ## Section 15 — Common errors |
| 323 | |
| 324 | | Error | Why it matters | |
| 325 | |---|---| |
| 326 | | Using US form numbers (1040) | Israel uses Form 1301 for individuals | |
| 327 | | Wrong deadline (April 30 for Form 1301) | April 30 is the legacy paper baseline; current online deadline is June 30 | |
| 328 | | Single capital gains rate for everything | Securities: 25%; significant shareholders: 30%; real estate: varies | |
| 329 | | Default credit point value without checking eligibility | Points vary by personal status; must calculate per individual | |
| 330 | | Treating Mas Shevach and surtax as separate | From 2026, investment property Mas Shevach counts toward surtax income | |
| 331 | | Forgetting Section 45א/47 pension credits | One of the most common filing errors for self-employed | |
| 332 | |
| 333 | --- |
| 334 | |
| 335 | ## Section 16 — Reference material |
| 336 | |
| 337 | | Resource | Reference | |
| 338 | |---|---| |
| 339 | | Tax Authority — Form 1301 service | https://www.gov.il/he/service/reporting-and-payment-2025-annual-tax-report-for-individuals | |
| 340 | | Shaam filing portal | https://www.misim.gov.il | |
| 341 | | Kol Zchut — income tax brackets | https://www.kolzchut.org.il/he/מדרגות_מס_הכנסה | |
| 342 | | Kol Zchut — tax credit points | https://www.kolzchut.org.il/he/נקודות_זיכוי | |
| 343 | | Kol Zchut — Mas Shevach | https://www.kolzchut.org.il/he/חישוב_מס_שבח | |
| 344 | | Real estate taxation office | https://www.gov.il/he/departments/topics/land_taxation | |
| 345 | | Income Tax Ordinance | https://www.nevo.co.il/law/70264 | |
| 346 | |
| 347 | --- |
| 348 | |
| 349 | ## Disclaimer |
| 350 | |
| 351 | > **חשוב:** כל המידע בקובץ זה מיועד למטרות מידע וחישוב בלבד. יש לבדוק כל עמדה מול רואה חשבון (Ro'eh Cheshbon) או יועץ מס (Yo'etz Mas) מוסמך לפני הגשה או פעולה. |
| 352 | |
| 353 | This skill and its outputs are provided for informational and computational purposes only and do not constitute tax, legal, or financial advice. Open Accountants and its contributors accept no liability for any errors, omissions, or outcomes arising from the use of this skill. All outputs must be reviewed and signed off by a qualified professional — such as a רואה חשבון (Ro'eh Cheshbon — CPA) or יועץ מס (Yo'etz Mas — tax advisor) licensed in Israel — before filing or acting upon. |
| 354 | |
| 355 | The most up-to-date, verified version of this skill is maintained at [openaccountants.com](https://openaccountants.com). Log in to access the latest version, request a professional review from a licensed accountant, and track updates as tax law changes. |
| 356 |
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About
Use this skill when preparing, reviewing, or advising on Israeli annual income tax returns. Trigger on phrases like "doch shnati", "Form 1301", "Form 1214", "דוח שנתי", "mas hachnasa", "income tax Israel", "nekudot zikui", "נקודות זיכוי", "tax brackets Israel", "mas yesafim", "מס יסף", "surtax Israel", "mikdamot", "מקדמות", "Mas Shevach", "מס שבח", "capital gains Israel", "Form 6111", "Form 856", "Form 126", or any Israel income tax return query. ALWAYS read this skill before advising on Israeli income tax returns.
ILty-2025
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