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Daily Israel Report

INN Report: How Much Do Olim Pay - or Save - in Taxes?

Recent changes lead INN to ask expert to sum up the basic rules for new olim covering income earned in Israel and abroad.
By David Lev
First Publish: 2/9/2011, 12:38 AM / Last Update: 2/9/2011, 1:34 PM

Flash 90

There's never been a better time to make aliyah, at least from a financial perspective, says accountant Ron Zalben, an expert on finances for olim (new immigrants).

“Several years ago, the rules changed to exempt all non-Israeli income from any taxes for the first 10 years of an oleh's residence in Israel," he said. "So if you have income or capital gains earned abroad, it's exempt from Israeli taxes.” And while that income is still subject to U.S. taxes, all the exemptions they had before will continue to apply.

While income earned in Israel is subject to tax, Zalben tells Israel National News that olim receive extra income credits for the first three and a half years they are in the country. Under the Israeli tax system, a male's income is credited with 2.25 points, while male olim get three extra credit points during their first 18 months in the country, two in the second 12-month period, and one in the third 12-month period. Each point is worth NIS 180 ($50) – so an oleh who begins working right away and earns, say, NIS 10,000, will receive a tax credit of NIS 945.

Working women get 2.75 points to start, and new female immigrants get the same point deal as men. But working women also get a point for each child; thus, a new woman immigrant with five children who has a job will get 9.75 points, or a credit of NIS 1,755. Also eligible for the oleh credits are returning residents who have been out of the country for six or more years, a change that was instituted on January 1.

Today, says Zalben, there are no limits on Israelis holding foreign currency accounts, so those who wish to live in Israel and save themselves accounting headaches – along with taking advantage of the foreign income exemption – often leave their money in their bank accounts abroad, using checks and credit cards to withdraw it when they need it. Zalben, who handles both Israeli and American taxes, urges anyone who is planning to make aliyah to discuss the financial implications with an accountant, to ensure that they are receiving the full benefits legally due them.