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Does Israel give an income tax exemption to a person with a recognized medical disability?

Yes. Section 9(5) of the Income Tax Ordinance [New Version] 5721-1961 exempts the income of an individual recognized as having a 100 percent medical disability, or 90 percent on a weighted calculation across several impairments, where the disability lasts at least 185 days. The exemption is capped: earned income is exempt up to an annual ceiling, and passive income up to a much lower one. Disability for this purpose is fixed by a medical committee rather than by a doctor’s letter, and the committee is convened through the National Insurance Institute on referral from the assessing officer. A recognition can be backdated, which opens a refund claim for earlier tax years.

The relief operates on income, not as a benefit payment, so it helps only a person who has taxable Israeli income in the first place. Section 9(5) separates earned income, meaning salary or income from a business or profession, from passive income such as interest, dividends, and rent, and sets a different annual ceiling for each. The medical committee scores impairments using the same schedule the National Insurance Institute applies to disability claims, but the determination is specific to the tax exemption and does not by itself create an entitlement to a disability pension. A determination may be permanent or limited to a stated period, and a period-limited determination has to be renewed before it lapses.

Applications go to the assessing officer, who refers the file to the medical committee, and the process runs from several months to more than a year. The claim years matter as much as the percentage: the Ordinance allows refund claims for open tax years, in practice up to six years back, so a recognition given today can produce a repayment covering salary already taxed. New immigrants should note that this exemption sits alongside the ten-year exemption on foreign income rather than replacing it. An employee who obtains a determination should also file for tax coordination so the employer stops withholding on exempt income. Our guide to tax credit points in Israel explains the separate credit-based reliefs.

⚖ In Practice
  • Governing law: Section 9(5), Income Tax Ordinance [New Version] 5721-1961
  • Competent authority: Israel Tax Authority (Rashut HaMisim) assessing officer; medical committee convened through the National Insurance Institute (Bituach Leumi)
  • Threshold: 100 percent medical disability, or 90 percent weighted across several impairments, for a continuous period of at least 185 days
  • Ceilings: earned income exempt up to roughly NIS 640,000 per year and passive income up to roughly NIS 77,000 per year (2026); the figures are updated annually by order
  • Retroactivity: refund claims are generally accepted for up to six open tax years
  • Committee fee: a few hundred shekels, payable when the medical committee is convened (2026)

From the full guide: Tax Credit Points in Israel (Nekudot Zikuy)

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Get a Free Consultation with Adv. Eli ShimonyPrepared under the direction of Adv. Eli Shimony, Eli Shimony Law Office · Editorial policy

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