Income Tax Exemption for People with Medical Disability (Right)

From All Rights (Kol-Zchut) (www.kolzchut.org.il)

הקדמה:

Those with medical disability established as either 100% or above 89%, according to a special calculation, may be eligible for exemption from paying income tax
Those who do not meet the eligibility criteria who have suffered a medical event may contact the Income Tax Medical Committee arranged by the National Insurance Institute
For more information, see the National Insurance Institute website


  • Those with medical disability established as either 100% or above 89%, according to a special calculation,may be eligible for exemption from paying income tax, up to a defined income limit which is updated annually.
  • Tax exemption eligibility begins after 185 days of disability.(those for whom a disability for a period of 184 days or less is not entitled to an exemption).
  • Those who meet the conditions of eligibility for exemption may receive tax refunds for up to six years retroactively, from the date the request was submitted.
  • Those holding a Certificate of Blindness/Visual Impairment, are also entitled to the tax exemption. For more details seeIncome Tax Exemption for the Blind and Visually Impaired.

Income Limits

  • The various income limits are established for:
    • Personal earned income.
    • Personal unearned income. The exemption for income that is not earned be granted only in cases where the earned income lesser than the ceiling set for this (or not at all income was earned)
    • Income from interest on financial compensation or insurance claims paid due to personal injury.
  • For personal earned income, an exemption up to the established limit is granted in any event.
  • In addition, only in cases where the earned income is less than the unearned income limit (or if there is no earned income at all), will an exemption for unearned income or income from interest on financial compensation or insurance claims paid due to personal injury be granted, in accordance with the the limits for these types of income (see the example below).

Tax-Free Income Limits

  • For personal earned income, as well as for cases in which disability is for more than 365 days, the limit is 608,400 NIS. It was 614,400 NIS for the 2014-2015 tax year and 602,400 NIS for the 2013 tax year.
  • For personal unearned income, as well as for cases in which disability is for between 185 and 365 days, the limit is 72,960 NIS . (It was 73,560 NIS in 2015, 73,680 NIS for 2014 and 72,240 NIS for the 2013 tax year.)
  • For income from interest paid on financial compensation or insurance claims paid due to personal injury which were deposited in a trust, savings plan or provident fund, the limit is 300,000NIS. (It was 262,320 NIS in 2015, 262,560 NIS in 2014 and 257,640 NIS for the 2013 tax year.)
Example:
  • A woman for whom 100% medical disability was established and whose period of disability exceeded 365 days earned 400,000 NIS in 2015.
  • She was granted a tax exemption for all of her income, which was less than the personal earned income limit of 614,000 NIS.
  • Due to the fact that she earned more than 73,560 NIS, she was not entitled to a tax exemption for unearned income for that year.
Example:
  • An individual for whom 100% medical disability was established earned 70,000 NIS in 2015 and was granted a tax exemption for this income.
  • Due to the fact that he earned less than 73,560 NIS, he is also entitled to a tax exemption for unearned income for that year:
    • If he had unearned income, it would be tax-exempt up to 73,560 NIS.
    • If he had income from interest paid on financial compensation due to personal injury, it would be tax-exempt up to 300,000 NIS.

Who is eligible?

  • Those who are eligible for the exemption must meet the following 4 conditions:
  1. Those with a taxable income.
  2. Those whom a medical disability has been determined permanently or temporarily for 185 days or more.
  3. The degree of disability is determined according to the following:
    • Established medical disability as 100% from one disability.
    • Established medical disability above 89% from multiple disabilities (the percentage calculations are weighted)
  4. This is if the disability has been established in accordance with one of the following laws:
  • Entitlement is only for those with medical disability according to the rates detailed above (those with medical disability established at a lower rate are not entitled to an income tax exemption even if their functional disability is 100%).

How to claim it?

  • Fill out Form 1516 - "Request for Tax Exemption".
  • A "True to the Original" copy of the protocol from the medical committee where the rate of disability was determined (such as a General Disability Medical Committee or Work Accident Victim Medical Committee) must be attached.
  • Submit the form with the document to the tax assessor's office nearest to your place of residence. Click here to locate the nearest tax assessor’s offices.
  • Those whose medical disability has not been established in accordance with one of the laws specified above, or whose disability was established in accordance with one of the laws but at a rate lower than is required, and who then underwent some kind of medical event may contact the Income Tax Medical Committee arranged by the National Insurance Institute
  • Those who meet the conditions of eligibility for exemption may receive tax refunds for up to six years retroactively, from the date the request was submitted.

Government agencies

Laws & Regulations

Additional publications

Sources

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