2026 Tax Brackets: 20% up to 19,000 Shekels and 31% up to 25,100
The 20% tax bracket has been expanded from 16,150 to 19,000 shekels per month, and the 31% bracket up to 25,100 shekels, a change resulting in monthly savings of up to 420 shekels.
In 2026, the threshold for the 20% tax bracket is raised to 19,000 shekels per month, up from 16,150 shekels. The 31% bracket now spans from 19,001 to 25,100 shekels, replacing the previous ceiling of 22,440 shekels. While the index-based update of tax brackets was frozen by law from 2025 to 2027, this specific adjustment was implemented separately. It keeps a larger portion of salaries under lower tax rates, impacting the net income of hundreds of thousands of employees.
Israel's tax system is layered, meaning a move to a higher bracket only affects the portion of income exceeding the threshold. The monthly tax table for 2026 is as follows:
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10% up to 7,010 shekels
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14% from 7,011 to 10,060 shekels
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20% from 10,061 to 19,000 shekels
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31% from 19,001 to 25,100 shekels
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35% from 25,101 to 46,690 shekels
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47% from 46,691 to 60,130 shekels
Above this amount, a 3% surtax is applied to annual income exceeding 721,560 shekels, with an additional two percentage points added to capital income above the same threshold.
Calculations and Tax Credits
For an employee with a taxable salary of 15,000 shekels, the tax before credits is 2,116 shekels per month (an effective rate of 14.1%). One tax credit point is worth 242 shekels per month (2,904 shekels per year). Israeli residents are entitled to base points, with additional credits available for women, parents of young children, discharged IDF soldiers, university graduates, and new immigrants.
At a salary of 20,000 shekels, the tax before credits is 3,226 shekels. Most of the salary is taxed at 10%, 14%, and 20%, with only the final 1,000 shekels entering the 31% bracket. At 30,000 shekels, the tax is 6,522 shekels (21.7% effective rate), and at 40,000 shekels, it reaches approximately 10,022 shekels (25.1% effective rate).
Economic Impact
The maximum monthly savings of 420 shekels is reached exactly at the 25,100 shekel mark. An employee earning 19,000 shekels gains 314 shekels per month (about 3,760 shekels annually). At 25,100 shekels, the savings reach 420 shekels per month (about 5,040 shekels annually). Beyond this point, the savings freeze as the expanded brackets are fully utilized.
Income tax is an annual calculation, not a monthly one. At the end of the year, employees should review their Form 106. A discrepancy in the employee's favor indicates a potential tax refund, while a discrepancy in the opposite direction may require a tax coordination (teum mas) review.
