IsraelLawIf you have ever looked at an Israeli payslip and tried to work out why two people earning the same gross salary take home different amounts, the answer is usually credit points. They are one of the few parts of the Israeli tax system that reliably puts money back in your pocket, and they are also one of the most commonly missed by people who arrive from abroad.
The frustrating part is that nobody hands them to you. The system assumes you will declare what you are entitled to, and if you do not, the default is that you pay more. New immigrants, foreign workers, returning Israelis, and even seasoned expats lose real money every year simply because they did not file one short form or did not realize a bonus existed. This guide explains what the points are, how much they are worth right now, who qualifies, and how to claim back anything you missed.
1. Overview: what credit points actually do
A credit point is a fixed shekel amount that is subtracted from your tax bill, not from your taxable income. That distinction matters. A deduction from income only saves you tax at your marginal rate; a credit point comes straight off the tax you owe, shekel for shekel. So a point is worth the same to a NIS 12,000-a-month earner as it is to a NIS 40,000-a-month earner.
The system sits in the Income Tax Ordinance [New Version], 1961, in the cluster of sections running from 33A to 47. Section 34 grants the basic residency points, section 36 adds points for women, and the new-immigrant bonus comes from the regulations issued under section 35. You do not need to memorize the numbers, but it helps to know there is a statute behind every point your accountant claims, because that is what an assessor at the Israel Tax Authority will check against if you are ever asked to prove an entitlement.
One important limit: credit points can reduce your tax to zero, but they cannot turn it negative. If you earn so little that you owe no income tax to begin with, extra points do you no good. A part-time worker on NIS 5,000 a month often pays little or no income tax even before points are applied, so the points sit unused. That surprises a lot of people who assume the points are a cash grant. They are not. They are a discount on tax you would otherwise pay.
I see this most often with new arrivals working part time in their first months. They proudly tell me they "pay no tax," then are baffled when their oleh bonus points produce no refund. The points only bite once your annual income passes the tax threshold (roughly NIS 7,000 in monthly salary for a basic taxpayer in 2026). Below that, the points are simply parked, and unlike a loss, they cannot be carried to a later year.
2. What a credit point is worth in 2026
For the 2026 tax year, the Israel Tax Authority set the value of one credit point at NIS 242 per month, which works out to NIS 2,904 over a full year. The figure is adjusted every January for inflation, so it creeps up a little each year. If you are reading this in a later year, check the current number on the Tax Authority website, because the multiplier matters once you start adding several points together.
Here is what the math looks like for a few common situations in 2026:
- A single man, Israeli resident, no children: 2.25 points, worth about NIS 544 off his tax every month.
- A married woman, Israeli resident, no children: 2.75 points (the 2.25 residency points plus 0.5 for being a woman), about NIS 665 a month.
- A mother of two young children can add several points for the children on top of her own, which often pushes her monthly credit well past NIS 1,000.
None of this is exotic. It is just arithmetic that the payroll software does automatically, provided it has been told which points you qualify for. The whole game is making sure it has been told.
3. Who gets points automatically
Several categories of points are granted by status rather than by application, so once your employer has the right information they flow through every month. The main ones are:
- Residency. Every Israeli tax resident receives 2.25 points under section 34. This is the foundation, and it is the point most often missing from a foreign worker's payslip because the system has not registered them as a resident.
- Women. A woman receives an additional 0.5 point under section 36, bringing her base to 2.75.
- Children. Parents receive points for children under 18, with the amount depending on the child's age. The year a child is born and the first years of life carry higher point values, and both parents can claim, with the larger share historically going to the mother. The rules here changed in recent years to give fathers more, so this is one area worth checking against the current regulations.
- Single parents and certain maintenance payers. A parent raising a child alone, and in some cases a person paying court-ordered alimony, can claim additional points under the relevant subsections.
- Discharged soldiers and national-service graduates. Points are granted for a limited number of years after completing IDF or recognized national service, which matters for the children of olim who serve after immigrating.
There are also partial credits tied to where you live. Residents of qualifying peripheral towns (a yishuv mezakeh) get a percentage reduction in tax, and residents of certain border communities get more. These are not strictly "points" but they work alongside them, and they are claimed through the same Tax Authority machinery.
The single most expensive mistake I see is a new resident whose employer never switched them from "non-resident" to "resident" status, so 2.25 residency points (NIS 544 a month, over NIS 6,500 a year) were never applied. Fixing it is straightforward: a corrected Form 101 plus, if needed, a refund claim to the assessing officer (pakid shuma). The money is usually recovered in full, but only if you notice within the six-year window.
4. Extra credit points for new immigrants
This is where the system becomes genuinely generous, and where olim leave the most money on the table. On top of the ordinary residency points, a new immigrant receives a bonus that tapers over three and a half years. The schedule set under the Income Tax Ordinance works like this:
- First 18 months: 1/4 of a point for each month (so an extra 4.5 points spread across that period).
- Next 12 months: 1/6 of a point per month (another 2 points).
- Final 12 months: 1/12 of a point per month (a final 1 point).
Add it up and an oleh receives roughly 7.5 bonus points over 42 months, in addition to the standard 2.25. In the early period, when the quarter-point monthly rate applies, that bonus alone is worth around NIS 726 a month in saved tax in 2026 terms. There is also a useful flexibility built in: you can ask to delay the start of the entitlement period (for up to a year) if you spent your first months abroad or out of the workforce, so the bonus lines up with when you actually start earning a salary in Israel.
Returning residents who qualify as toshav chozer can receive a comparable, shorter set of points, and the conditions depend on how long you were away. The point entitlement is separate from the well-known ten-year exemption on foreign income, which is a different benefit entirely. You can hold both at once.
Separately from points, the government announced a temporary headline benefit for people who make aliyah during 2026: a 0% income tax rate on most income for the 2026 and 2027 tax years, capped at an annual income of about NIS 1 million. If you qualify for that, your credit points produce no saving in those years (there is no tax to reduce), but the points become valuable again once the holiday ends. Anyone planning their aliyah year-end should run both benefits together before signing an employment contract, because the timing of your arrival can be worth tens of thousands of shekels.
5. Foreign workers and non-residents
The rules split sharply depending on your residency status, and this is the area where foreign nationals most often get it wrong.
If you are an Israeli tax resident, even on a work visa, you are entitled to the same residency points as anyone else. Tax residency in Israel turns on where your "centre of life" is, not on your passport, so a foreigner who lives and works in Israel for most of the year is usually a resident for tax purposes and should be getting the 2.25 points. If your payslip shows them missing, that is a fixable error, not a rule.
If you are a genuine non-resident, working in Israel temporarily while your home and family remain abroad, the general position is that you do not receive the residency points. The logic is that those points belong to the country where you are taxed as a resident. There are carved-out exceptions set by regulation for specific groups, most notably foreign caregivers and certain agricultural workers, who receive a defined, limited number of points despite being non-residents. These special entitlements are narrow and change from time to time, so they should be confirmed against the current rules rather than assumed.
A practical wrinkle: many foreign workers are taxed at a flat rate or under a special withholding arrangement that already builds in (or deliberately excludes) credit points. Reading the payslip line by line is the only way to know whether points have been applied, double-counted, or left out.
Foreign caregivers are the group I am asked about most. Their entitlement is set by a specific Tax Authority regulation and is narrower than a resident's, so the employer's payroll often defaults to applying none at all. Where the worker has a valid permit through the Population and Immigration Authority and the employer runs proper payroll, the available points can and should be applied. Keep in mind these are also the workers least likely to file a year-end return, which is exactly how the over-paid tax goes unclaimed.
6. How to claim your points, and how to reclaim what you missed
The mechanism is less mysterious than it sounds. There are really two moments that matter: the start of the year, and the end of it.
At the start of each year (and each new job), you fill in Form 101 (Tofes 101). This is the short employee declaration where you tell your employer your residency status, marital status, children, and any special circumstances. The payroll system reads this and applies the matching points every month. If you never complete it, the employer is entitled to apply only the basic residency point or, in some cases, to withhold at the top rate. Many olim simply never receive the form in English and skip it. That single omission is the root of most missed points.
At the end of the year, you can correct any shortfall by filing an annual return with the Israel Tax Authority. If your employer over-withheld because points were not applied (or because you changed jobs mid-year and your income was taxed as if each job were your only one), the return reconciles it and triggers a refund. Most salaried employees are not required to file, but you are allowed to file voluntarily precisely in order to recover an over-payment.
The reclaim window is six tax years. In 2026 you can still file to recover over-paid tax going back to the 2020 tax year. After that the year drops off and the money is gone. Refunds carry interest and inflation adjustment from the end of the relevant tax year, so an old claim is often worth a little more than the raw figure suggests.
- Gather your annual Form 106 from each employer (the year-end summary of salary and tax withheld).
- Confirm your residency and family status for each year you are claiming.
- File the return for each year, either through the Tax Authority's online system or on paper through your assessing office.
- Expect the assessor to process and pay refunds within a few months, sometimes faster for clean salaried cases.
When a new client comes to me having worked in Israel for a few years without ever filing, the first thing I do is pull the Form 106 for each open year and check whether residency and oleh points were applied. It is common to find a four-figure refund per year sitting there untouched. Six years of un-applied residency points alone (2.25 points at roughly NIS 2,900 a year) can add up to well over NIS 35,000 before interest. The deadline is unforgiving, so do not let the oldest year lapse while you "get around to it."
Credit points are not glamorous, and no one will chase you to claim them. But they are real money, they are written into the statute, and for most foreign workers and new immigrants they are the single easiest tax saving available. Spend twenty minutes confirming what is on your payslip. If the points are not there, they are almost always recoverable.
This article explains the general framework. The exact points you qualify for depend on your residency, family situation, and the year you arrived, and the regulations are updated regularly. Before filing a claim worth real money, confirm your specific entitlement with a qualified Israeli tax adviser or directly with the Israel Tax Authority.