Income Tax Exemption for People with Medical Disability (Right)

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

Introduction:

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
Those who were eligible before the current tax year, may be entitled to a tax refund retroactively for up to 6 years
Someone who does not meet the eligibility criteria but has suffered a medical episode or whose conditioned has worsened, may contact the Income Tax Medical Committee arranged by the National Insurance Institute
For more information, see the Tax Authority website

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.

Income Limits

  • 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 Personal Earned Income:
    • In cases where disability is established for more than 365 days, the tax exempt limit is 606,000 NIS, for the 2017 tax year. (608,400 NIS in 2016, 614,400 NIS in 2014-2015 and 602,400 NIS in 2013.)
    • In cases where disability is established for between 185-364 days (inclusive), the tax exempt limit is 72,720 NIS for the 2017 tax year. (It was 72,960 NIS in 2016, 73,560 NIS in 2015, 73,680 NIS in 2014 and 72,240 NIS in 2013.)
  • Tax-Exempt Limits on Income Including Personal Earned Income and Unearned Income:
    • The tax exempt limit for income that includes personal earned income and unearned income is 72,720 NIS for the 2017 tax year. (It was 72,960 NIS in 2016, 73,560 NIS in 2015, 73,680 NIS in 2014 and 72,240 NIS in 2013.)
    • The exemption is given on unearned income only in cases in which the unearned income is less than the limit amount - 72,720 NIS for the 2017 tax year (72,960 NIS in 2016, etc.) or where there is no personal earned income at all.
    • Tax-Exempt Limits on Income Including Personal 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 299,040 NIS for the 2017 tax year (300,000 NIS in 2016, 262,320 NIS in 2015, 262,560 NIS in 2014 and 257,640 NIS in 2013).
    • 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 - 72,720 NIS for the 2017 tax year (72,960 NIS in 2016, etc.) or where there is no personal earned income at all.
Example
  • 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.
Example
  • 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, 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 90% from multiple disabilities (the percentage calculations are weighted)
  4. 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%).
Tip
  • The death of a person does not 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.
  • For those that 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. The "Yad Mechuvenet" centers run by the National Insurance Institute provide free guidance for those who will be appearing before a medical committee.
  • 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.

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