Tax refund for discharged soldiers: credit points, tax coordination, and six-year lookback
Two credit points for 36 months are worth up to 5,808 shekels annually, but many discharged soldiers fail to utilize them because their initial income is below the tax threshold. Significant overpayments often occur due to lack of tax coordination between multiple jobs, but these funds can be reclaimed for up to six years.
Maya worked for a year as a waitress and in a service center, paying over 20,000 shekels in taxes she did not actually owe. Israel's tax system relies on credit points: each point reduces tax by 242 shekels per month (2,904 shekels per year, as of 2026). A male resident starts with 2.25 points, and a female with 2.75. Those who completed full mandatory service (23 months for men, 22 for women) receive two additional points for the 36 months following discharge, while shorter service grants one point. These 36 months are calculated from the month after discharge, typically spanning four partial tax years. A newly discharged man reaches 4.25 points (erasing about 1,030 shekels of tax monthly), while a woman reaches 4.75 points (about 1,150 shekels).
Combat vs. rear soldiers: the points are the same
Contrary to popular belief, there is no difference in credit points between combat, combat support, or rear soldiers; only the duration of service matters. Distinctions based on service type apply to other benefits, such as the personal deposit (up to 28,000 shekels) or new benefits for reserve combat soldiers.
Why points are often wasted
A credit point only reduces tax if there is tax to be paid, and unused months do not accumulate. Without military points, a man begins paying income tax at a gross monthly salary of about 5,400 shekels; with 4.25 points, this threshold rises to 9,300 shekels, and for a woman with 4.75 points, to 10,200 shekels. A waiter earning 7,500 shekels pays no tax, meaning the benefit is wasted. Employees must ensure they mark the correct section on form 101 and attach their discharge certificate to receive these points.
Second jobs and tax coordination
When holding multiple jobs, the secondary employer is required to deduct tax at the maximum rate of 47% unless the employee performs tax coordination. This can be done for free via the Tax Authority's personal portal. Coordination allows for the division of credit points between employers, preventing over-deduction during the year.
Maya's case: a refund of over 20,000 shekels
Maya worked two jobs: as a waitress (7,000 shekels gross) and in a service center (4,000 shekels). She was below the tax threshold at her primary job. At the service center, without tax coordination, 47% was deducted—totaling 22,500 shekels annually. The actual tax liability on an 11,000-shekel income with 4.75 points is only about 2,000 shekels. The difference of over 20,000 shekels is waiting to be reclaimed.
Reclaiming funds for six years
Tax refunds can be claimed retroactively for up to six years. In 2026, it is still possible to file for 2020. Requests are submitted online with form 106 from all employers. Refunds include indexation and 4% annual interest. Discharged soldiers can also claim points they failed to use in previous years. Other common refund sources include part-year employment, National Insurance (Bituah Leumi) payments, pension deposits, and academic degree credits.
