Introduction: How the Israeli Tax System Works
In many countries around the world, every citizen is required to file an annual tax return. In Israel, however, most employees don’t need to file a report themselves because the tax system is based on the employer’s payroll system.
The advantage – simplicity. Your employer calculates and deducts the tax each month and transfers it to the Israel Tax Authority.
The challenge – errors can happen, especially when there are changes during the year.
Payroll systems know how to calculate tax correctly only when the employee works at the same place throughout the entire year and properly filled out Form 101 at the beginning of the year: including updates to marital status, children, completion of studies, citizenship, and residency.
In other cases, such as working in two places, starting work mid-year, childbirth, periods of unemployment, or receiving payments from National Insurance (Bitu’ach Le’umi), gaps in tax calculations can occur.
A Recommendation: Couples who manage a shared household should consider filing a tax refund request together.
Additional cases where it’s worth checking for a refund include situations with child disabilities, withdrawal of funds that were already taxed, tax payments on investment realizations (real estate, stock market, etc.). In such cases, it’s worth checking whether you’re eligible for a tax refund or if your tax credit points weren’t fully calculated.
You can easily check this using the Israel Tax Authority’s tax credit points calculator.
What Is a Tax Refund?
A tax refund is an amount of money that the Israel Tax Authority returns to an employee who paid excess tax during the year. The refund also includes interest and linkage (linked to the Consumer Price Index + 4%), up to the date when the money is actually returned.
A refund is usually created by one of the following factors:
– Changing workplace or working only part of the year
– Not updating tax credit points
– Working at multiple places without tax coordination
– Periods of unemployment or maternity/paternity leave
– Additional entitlements you didn’t use (donations, life insurance, children, etc.)
Here too, it’s recommended to use the Israel Tax Authority’s tax credit points calculator to understand whether the tax that was actually deducted matches your entitlements.
When Should You Check Tax Refund Eligibility?
The most common situations where checking your eligibility is recommended include:
– Working at two or more places in the same year
– Ending employment or moving between workplaces
– Starting work mid-year
– Periods of unemployment, maternity/paternity leave, or receiving payments from National Insurance (Bitu’ach Le’umi)
– Not updating details on Form 101
Even those who made recognized donations according to Section 46 of the Income Tax Ordinance, or made private deposits to life insurance or pension funds (Kupot Gemel) may be eligible for a tax refund.
It’s worth doing a preliminary check using the Israel Tax Authority’s tax credit points calculator, which instantly calculates the total credit points you’re entitled to according to your personal details.
Tax Credit Points: The Key Tax Benefit in Israel
Tax credit points are the main benefit that reduces the amount of tax you pay. Every Israeli resident is entitled to 2.25 credit points, and each point is worth approximately NIS 235 per month (as of 2025).
Women are entitled to an additional point (total of 3.25 points). Beyond that, you can receive additional points according to your personal and family situation.
You can check the exact number of points you’re entitled to according to age, marital status, and children, using the Israel Tax Authority’s official calculator.
Tax Credit Points for Children
– In the birth year – one point for the primary caregiver and 1.5 points for the other parent
– From age one to age 5 – 2.5 points for the primary caregiver
– From age 6 to age 17 – one point per child
– Ages 18–19 (during military or national service) – one point
– Single parents are entitled to additional points
Tax Credit Points for Education
– Bachelor’s degree – one point for one year (or half a point for two years)
– Master’s degree – half a point per year
– Engineering and technical studies – half a point per year
Additional Tax Credit Points
– Full military service – 2 points for three years after discharge
– Living in periphery settlements -up to 3 additional points according to area
– Paying child support, widows/widowers, or a spouse who doesn’t work – according to Israel Tax Authority guidelines
– Supporting a dependent elderly parent or a child with a disability -according to medical approvals
Situations That Require Proactive Action
Some entitlements are only received if you take action to claim them. The most common examples are:
Donations to recognized non-profit organizations -You must present a receipt with “Section 46” notation.
Private deposits to life insurance or pension funds (Kupot Gemel) independently – You must present an annual confirmation from the insurance company.
Academic studies – You must present a dedicated form from the educational institution.
In such cases, using the Israel Tax Authority calculator before filing can help you understand whether it’s even worth filing for a tax refund.
How to File for a Tax Refund in Israel
You can file your request through one of three main methods:
Independently – Through the Israel Tax Authority website, using an online form and attaching required documents. Today there are also dedicated digital platforms that allow you to complete the process online, at a low cost or for a small percentage of the refund (usually under 10%).
Through an accountant or tax advisor -Professional and comprehensive service, usually for a fee of about 15 – 20% of the refund.
Through tax refund companies – They operate in a model similar to accountants but with a streamlined process and sometimes lower commission.
In any case, it’s important to review the preliminary assessment before final submission, to ensure no missing data was entered, such as children, residency status, or education credit points. It’s recommended to keep a copy of all documents submitted.
What Documents Do You Need to Attach?
– Form 106 from every workplace (can also be downloaded from the Israel Tax Authority website)
– Confirmations of private deposits to pension funds (Kupot Gemel), advanced training funds (Keren Hishtalmut), or life insurance
– Resident certificates – mandatory attachment
– Additional supporting confirmations – degree completion, completion of military service, immigrant certificate ,disability certificate, etc.
– Receipts for recognized donations according to Section 46
No Obligation to File – But Worth Checking
Most employees in Israel are not required to file an annual report, but it’s worth checking the data in the Israel Tax Authority system before filing, especially if there was tax coordination, a job change, or a period without income.
A quick check using the Israel Tax Authority’s tax credit points calculator can prevent errors and save a significant amount of money.
If during the year you paid too much tax, you’ll receive a refund. If you paid too little, you may be required to pay the difference.
In Summary
The Israeli tax system is designed to be simple, but it’s not always accurate. Errors in tax coordination, job changes, or failure to update information can cause overpayment of thousands of shekels per year.
A proactive review of your tax credit points and personal entitlements can yield a significant refund and sometimes even improve your overall financial management.
Take action today: Review your tax situation, gather your documents, and ensure you’re claiming every credit point you’re entitled to. Your future financial self will thank you for taking this step now.
