Extra tax credit for parents

What are the tax credits and how do they work?

Israeli tax resident individuals are entitled to a specific number of credit points. Each credit point will reduce your income tax bill by an amount of ILS 2,676 per year (2022). Your entitlement to more tax credit points will depend on your circumstances. So, the extra tax credit for parents could reduce your tax liability and leave more money in your pocket for spending.

Parent tax credits – before the new law

1. Year of birth
   1.5 credit points 

2. Ages 1-5
   Father: 2.5 credit points
   Mother: 2.5 credit points

4. Ages 6-17
   Father: 0.0 credit points
   Mother:  1.0 credit point
5. Age 18
   Father: 0.0 credit points
   Mother: 0.5 credit points

What does the new law include?

The new law grants and extra tax credit points for employed parents. Each parent will receive a tax credit point throughout 2022 for each child aged 6 to 12 years. This includes children who turn 12 during the 2022 year.

When will I actually see the credit on the pay slip and how much will it be worth?

The payroll departments of your workplace will be able to act on it already in the upcoming months salary (May 2022). Because income tax is calculated annually, and the benefit is retroactive from January, eligible parents will be able to receive a substantial amount already in the next salary.

For example, a father of a child between the ages of 6-12, who earns gross NIS 10,000 per month (and has no circumstances which awarded him other additional credit points), paid income tax of NIS 686 each month of the year. For the months of January to April, this tax has already been deducted from his salary each month. But now he is actually entitled to a refund of a credit point for four months and a reduced tax already on May – in total this is a benefit of about NIS 1,100. In other words, instead of paying a tax of NIS 686 this month, as in every month, a negative income tax of NIS 314 will appear on the slip.

It should be noted that workplaces are also allowed to perform a retroactive calculation during the following months and not everyone will see the refund already in the next salaryWhat are the income tax rates in Israel ?

Will the extra tax credit for parents be issued in future years?

At the moment the law was approved as a temporary provision that relates solely to the tax year 2022. It has estimated budget cost of NIS 2.5 billion to cover the 2022 year. The government and Knesset members will be able to extend the temporary order if they wish, but this will require further legislation.