Tax credit points and tax benefits — how to pay less
Tax credit points and tax benefits can directly reduce the income tax you pay and increase the salary deposited into your account. On this page, you will learn how tax credit points work, who may be eligible for additional benefits, and what needs to be updated in Forms 101 and 106 to avoid unnecessary tax payments and check eligibility for a refund.
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Income tax may seem like an unavoidable burden, but the state grants "tax credit points" that directly reduce the amount of tax you have to pay. Understanding these points and correctly completing the relevant forms can be worth thousands of shekels per year.
What are tax credit points, and what are they worth?
Tax credit points are "coupons" that reduce the amount of tax calculated on your gross income.
- Monetary value: Each tax credit point has a fixed annual value that is updated each year. As of 2026, one point is worth 242 NIS NIS per month (approximately 2,904 NIS NIS per year).
- How does it work? If your calculated tax is 1,000 NIS and you have 2.25 tax credit points (the base entitlement for every Israeli resident), you will actually pay less than 500 NIS in tax.
Calculation method
242 multiplied by 2.25 = 544.5 NIS
1,000 NIS minus 544.5 NIS (tax credit points) = 455.5 NIS tax balance.
Who is eligible for benefits?
Every Israeli resident automatically receives 2.25 tax credit points (a female Israeli resident receives 2.75). In addition, you can accumulate extra points based on your personal circumstances:
Eligibility for additional tax credit points
| Reason for eligibility | Who is eligible? |
|---|---|
| Parenthood | Parents of children (with more points for young children). |
| Military/national service | Discharged soldiers and those who complete national service (for 3 years after completion). |
| Higher education | Graduates with an academic degree or professional certificate. |
| Family status | Single-parent families or those making alimony payments. |
| Residential areas | Residents of certain localities (border-area or peripheral communities). |
For more details about tax credit points and eligibility, visit the Kol Zchut website.
Form 101: your way to update the authorities
Form 101 ("Employee Card") is the form you complete at the beginning of each year or when starting a new job. It is how your employer knows how many tax credit points to grant you.
When must the form be updated?
When should you update Form 101?
- When a child is born.
- When you complete an academic degree.
- When you move to an eligible locality.
- When your marital status changes (marriage/divorce).
Form 106: the annual summary and your path to a tax refund
Form 106 is a summary of all the information from your payslips throughout the tax year (January to December). Your employer is required to provide it to you by the end of March of the following year.
What do you do with Form 106?
- Checking for errors: Make sure that the total salary and tax paid match the amounts you received.
- Tax refund: If you worked for only part of the year, or changed jobs and did not carry out tax coordination, this form is the basis for submitting a tax refund application to the Israel Tax Authority.
- Tax coordination: Use the data to carry out online tax coordination for the following year if you have more than one employer.
- Receiving a credit for donations: Under Section 46.
If you worked at several places, you will receive Form 106 from each of them.
Frequently asked questions
I forgot to update Form 101 when my child was born. Is the money lost?
Not at all. You can ask your employer to make a "retroactive correction" within the tax year, or submit a tax refund application at the end of the year using Form 106.
Can tax credit points become "net pay" if I do not reach the tax threshold?
No. Tax credit points can reduce the tax to 0, but they cannot create a "negative tax" (meaning that the state will not pay you money if you did not reach the tax threshold in the first place).
In summary,
Proper management of tax credit points and forms (101 and 106) is the most direct way to increase your net pay without increasing your gross pay. Make sure your employer knows everything about you—every child, every degree, and every change in status is worth money in the bank.