Those who have an established medical disability of 100% or above 90%, according to a special calculation, may be eligible for an income tax exemption 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.)
- For those who have an established disability between 185-364 days, the exemption is based on the part of the person's income and is determined according to the ratio of the number of days in the tax year for which the disability was determined and 365. If the disability period continues into the next tax year, the tax won't exceed the ceiling amount from the first year.
- 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.
- The special calculation to establish the exemption also takes into account disability levels determined based on selected disabilities (that are not taken into account when calculating the general disability benefit).
Who is eligible?
- Those who are eligible for the exemption must meet the following 4 conditions:
- They must have a taxable income.
- They must have a medical disability that has been determined permanently or temporarily for 185 days or more.
- The degree of disability is determined according to the following:
- Established medical disability of 100% from one disability.
- Established medical disability above 90% from multiple disabilities (the percentage calculations are weighted)
- The disability has been established in accordance with one of the following laws:
- The Persons with Disability Law (Compensation and Rehabilitation) (disabled IDF veterans)
- The Invalids (War Against the Nazis) Law (individuals disabled in war against the Nazis)
- The Invalids (Nazi Persecution) Law (Holocaust survivors receiving a pension from the Ministry of Finance)
- The Benefits for Victims of Hostile Acts Law (victims of hostile acts)
- The Ringworm Victims Compensation Law (ringworm victims)
- The National Insurance Law for Determining the Degree of Work Disability ,Determining the Degree of General Disability or Determining the benefits for a volunteer who is injured while volunteering.
- One whose medical disability has not been established according to 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 episode, may contact the income tax medical committee.
- 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%).
- The death of a person does not stop the process of his/her tax exemption request.
- If a person dies before receiving the full tax refund that he/she was entitled to, his/her heirs are entitled to tax refund in his/her name.
- The tax refund includes income that the deceased received during his/her life and not income received after death.
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 who are entitled to an exemption that have an employer or who receive an allowance and have been determined to have permanent disability, will receive general approval from the tax assessor, which will be valid for future years as well. They must give the certificate or approval to the employer or to the pension payer.
- Those who are entitled to an exemption and who have several employers or payers, or whose period of disability is not permanent, should request a tax reduction form from the tax assessor to give to the employers or payers (tax coordination).
- Those who met the conditions of eligibility for exemption in the years prior to the current tax year, may receive tax refunds for up to six years retroactively. For example in 2019 tax return requests can be made from 2013 and on (see "income limits that are exempt from taxes in previous years").
- Requests should be submitted to the tax authority in order to receive a return.
- For more information seetax refunds for those with medical disability.
- The various income limits are established for:
- Personal earned income only.
- Personal earned income (if there is) and unearned income. The exemption for income that is not earned is granted only in cases where the earned income is less than the ceiling set for this (or there is no earned income at all).
- Personal earned income (if there is) and unearned income, including interest on financial compensation or insurance claims paid due to personal injury. This exemption is granted only in cases where the earned income is less than the ceiling set for this (or there is no earned income at all).
Tax-Free Income Limits
- Tax-Exempt Limits on Personally Earned Income:
- In cases where disability is established for more than 365 days, the tax exempt limit is 615,600 NIS, for the 2019 tax year.
- In cases where disability is established for between 185-364 days (inclusive), the tax exempt limit is 73,800 NIS for the 2019 tax year. The exemption will be calculated for part of the income in the tax year relative to the number of days in the tax year for which the disability was determined and 365. If the determined disability period continues into the next tax year, the exemption amount for the two tax years shall not exceed the ceiling set for the first tax year.
- Tax-Exempt Limits on Income Including Personally Earned Income and Unearned Income:
- The tax exempt limit for income that includes personal earned income and unearned income is 73,800 NIS for the 2019 tax year.
- The exemption is given on unearned income only in cases in which the unearned income is less than the limit amount - 73,800 NIS for the 2019 tax year.
- Tax-Exempt Limits on Income Including Personally Earned Income and Unearned Income, including, income from interest paid on financial compensation or insurance claims:
- The tax exempt limit on income that includes interest paid on financial compensation or insurance payments due to personal injury which were deposited in a trust, savings plan or provident fund is 303,600 NIS for the 2019 tax year.
- The exemption is given on the income from this interest payment only in cases in which the unearned income is less than the limit amount - 73,800 NIS for the 2019 tax year.
Tax exempt income limits in previous years:
|Tax Year||Personally earned income for someone with disability for at least 365 days||Personally earned income for someone with a disability for 185-364 days||Personally earned income + income that is not from personal earning (if the amount from personal earning is lower than this limit)||Personally earned income + income that is not from personal earning interest on compensation money or insurance (if the amount from personal earning is lower then this limit|
|2018||608,400 NIS||72,960 NIS||72,960 NIS||300,000 NIS|
|2017||606,000 NIS||72,720 NIS||72,720 NIS||299,040 NIS|
|2016||608,400 NIS||72,960 NIS||72,960 NIS||300,000 NIS|
|2015||614,400 NIS||73,560 NIS||73,560 NIS||262,320 NIS|
|2014||614,400 NIS||73,680 NIS||73,680 NIS||262,560 NIS|
|2013||602,400 NIS||72,240 NIS||72,240 NIS||257,640 NIS|
|2012||594,000 NIS||71,180 NIS||71,180 NIS||254,040 NIS|
|2011||579,600 NIS||69,480 NIS||69,480 NIS||247,680 NIS|
- A woman for whom 100% medical disability was established and whose period of disability exceeded 365 days earned 400,000 NIS in 2016 through personal income.
- She was granted a tax exemption for all of her income, which was less than the personal earned income limit of 608,400 NIS for that year.
- Due to the fact that she earned more than 72,960 NIS, she was not entitled to a tax exemption for unearned income for that year.
- An individual for whom 100% medical disability was established, earned 70,000 NIS personal income in 2016 and was granted a tax exemption for this income.
- Due to the fact that he earned less than 72,960 NIS, he is also entitled to a tax exemption for unearned income for that year:
- If he had unearned income in 2016, his total income (from personally earned and unearned income) would be tax-exempt up to 72,960 NIS (in addition to the 70,000 NIS exemption on his work income, he is entitled to an exemption on an additional 2,960 NIS of unearned income).
- If in 2016 he had income from interest paid on financial compensation due to personal injury, his total income for the year (personally earned income and unearned income including interest payments on the compensation) would be tax-exempt up to 300,000 NIS (in addition to the 70,000 NIS exemption on his personally earned income he is entitled to an exemption on an additional 230,000 NIS (300,000 - 70,000) of unearned income, including income from the interest paid on the personal injury compensation).
- Eligibility amounts for the first tax year will determined by using the ratio of 219/365 (3/5).
- The exemption will be calculated based on 3/5 of the person's income for the tax year and 3/5 of the personally earned income limits (608,400 NIS in 2016), unearned income limits (72,960 NIS in 2016) or income including interest paid on financial compensation or insurance due to personal injuries (300,000 NIS in 2016).
- Personally earned income exemption limit for this year would be 365,040 NIS (based on 608,040 X 3/5).
- Exemption limit including unearned income for this year would be 43,776 NIS (based on 72,960 X 3/5). If the person's personally earned income is less than 43,776 NIS, he is entitled to a tax exemption up to the amount of 43,776 NIS that can include unearned income as well.
- If he was paid interest on financial compensation or insurance due to personal injury, the exemption amount for this year - including this income - would be 180,000 NIS (based on 300,000 X 3/5). If the person's personally earned income is less than 43,776 NIS, he is entitled to an exemption on an amount up to 180,000 NIS on all of his income (including income from interest paid on financial compensation of interest due to personal injury).
Laws & Regulations
- Income Tax Ordinance - Section 9(5)
- Income Tax Regulations (Establishing the Degree of Disability), 5740-1979 (on the Nevo website)
- Income tax calculation table for January 2019 and on - on the Tax Authority website.
- Know Your Rights and Obligations Packet - on the Tax Authority website.
- Income Tax Circular regarding the calculation of the statute of limitations to submit an income tax exemption because of a disability exemption
- Original translation performed by The Shira Pransky Project as part of a grant from The Fellowship Fund.