Israeli taxes for Americans: fitting in your US return

Short answer: once you live in Tel Aviv, Israel will usually tax your income as a resident, and Uncle Sam still wants a return every year. The trick is making sure you don't pay twice.

The short version

Israeli tax residency turns on your "center of life," with day-count presumptions at 183 days in a year, or 30 days plus 425 days over three years [1].
New immigrants (olim) and long-term returning residents get a 10-year exemption on foreign-source income in Israel. For people who become residents on or after January 1, 2026, the old exemption from reporting that income is gone [3][4].
The US–Israel income tax treaty dates from 1975 [5]. Like most US treaties, it doesn't free US citizens from US tax on their worldwide income.
There's no US–Israel totalization agreement [6], which matters for the self-employed and for Social Security planning.
You file both returns: Israel's (when required) and your US Form 1040, plus FBAR and often Form 8938 [8].

General information only. A US expat tax preparer, ideally one who also knows Israeli tax, can check your situation.

Are you an Israeli tax resident?

Israel taxes its residents on worldwide income, so this is the first question. Under the Income Tax Ordinance, you're a resident if your center of life is in Israel. The Israel Tax Authority weighs your family, economic and social ties: where your permanent home is, where your family lives, where you work and where your money and memberships are [1].

Two day-count presumptions help [1][2]:

Test	What triggers it
183-day presumption	You spent 183 days or more in Israel during the tax year
30/425-day presumption	You spent 30 days or more in Israel this year, and 425 days or more across this year and the two before it

Any part of a day counts as a day [1]. Both presumptions can be rebutted by you or by the assessing officer, and you can be a resident without meeting either one [2]. Israel's tax year is the calendar year, the same as the IRS.

New immigrants and returning residents who lived abroad for ten years can also ask not to be treated as Israeli residents for their first year, an "acclimation" year. The request goes to the Israel Tax Authority within 90 days of arrival, and detailed rules apply [2].

The 10-year exemption for new immigrants, and what changed in 2026

This is the headline benefit for Americans making aliyah. Olim, and "veteran returning residents" who were away for a long time, are generally exempt from Israeli tax on foreign-source income for 10 years after becoming tax residents [4]. Think of US rental income, dividends from a US brokerage account or a 401(k) distribution: Israel generally doesn't tax them during those ten years.

The reporting change

Until recently, olim didn't even have to report that foreign income to Israel. An amendment to the Income Tax Ordinance passed on April 2, 2024 removes that reporting exemption for people who become Israeli residents on or after January 1, 2026 [3]. What this means in practice:

The tax exemption itself stays for those eligible. You still don't pay Israeli tax on qualifying foreign income [3][4].
You must report worldwide income and foreign assets to the Israel Tax Authority, even if the income is exempt [3][4].
Trusts with new immigrants as settlors or beneficiaries are covered too [3].
If you became a resident before January 1, 2026, the older reporting exemption generally continues for the rest of your 10-year period [3].

For Americans, this mostly means more paperwork, not more tax. But if you arrive in 2026 or later, plan on an Israeli return listing your US accounts.

A newer break for Israeli income

Nefesh B'Nefesh's 2026 tax update describes a temporary reform for olim who become residents between November 5, 2025 and February 10, 2027: reduced Israeli tax on Israeli employment and business income through 2030, with annual caps [4]. This one is new and the details matter, so check the Tax Authority's current guidance or ask a preparer before counting on it.

Your US return doesn't go away

The US taxes citizens wherever they live. From Tel Aviv you'll still file a Form 1040 every year, with an automatic extension to June 15 for Americans abroad [4]. The main tools to avoid double tax:

Tool	What it does	Key figure
Foreign earned income exclusion (Form 2555)	Excludes foreign wages and self-employment income	$130,000 for tax year 2025; $132,900 for 2026 [7]
Foreign tax credit (Form 1116)	Credits Israeli income tax against US tax on the same income	No dollar cap, but limits by category
US–Israel treaty	Sets rules for pensions, Social Security and some other income	See the treaty text [5]

Israel's income tax is progressive, and Tel Aviv salaries in tech often land in the higher brackets, so Americans earning Israeli salaries often pay more tax to Israel than they'd owe the IRS on the same wages. In that case the foreign tax credit often wipes out US tax on Israeli wages. Nefesh B'Nefesh notes the exclusion is often not the better choice, because it can cost you the refundable Child Tax Credit and IRA contributions [4]. Run the numbers both ways. Our guide to the foreign earned income exclusion vs the foreign tax credit explains how.

The 10-year exemption trap

Here's the catch Americans often miss. If Israel exempts your US-source income for 10 years, you pay no Israeli tax on it, so there's no Israeli credit to offset US tax. Your US dividends, rent and retirement withdrawals stay fully taxable on your 1040. The exemption helps your Israeli bill, not your American one.

Reporting forms

FBAR (FinCEN Form 114): required if your foreign accounts together top $10,000 at any time in the calendar year. It's due April 15 with an automatic extension to October 15 [8]. Israeli pension accounts count [4].
Form 8938: for Americans living abroad, required when foreign financial assets exceed $200,000 at year-end or $300,000 at any time (single), or $400,000 and $600,000 (married filing jointly) [8].

Israeli pension funds and the keren hishtalmut (study fund) raise their own US questions; see Israeli pensions and keren hishtalmut.

The treaty: what it does and doesn't do

The US–Israel Income Tax Treaty dates from 1975 [5]. It addresses which country taxes what: business profits, pensions, Social Security and more. Like almost every US treaty, it contains a saving clause that lets the US tax its own citizens as if the treaty didn't exist, with specific exceptions. In plain English: the treaty can help, but it won't stop you from filing.

Nefesh B'Nefesh notes that under the treaty's Social Security article, US citizens who are Israeli residents may be able to exclude US Social Security benefits from US adjusted gross income [4]. That's a meaningful point for retirees, and one to confirm with a preparer.

No totalization agreement

The US has totalization (social security) agreements with 30 countries, and Israel isn't on the list [6]. What that means:

Employees generally pay Bituach Leumi, Israel's national insurance, and health tax on Israeli wages. If your employer is American, you may also owe US Social Security tax in some setups.
The self-employed can end up paying both US self-employment tax and Israeli national insurance on the same income, with no agreement to sort it out. See self-employed abroad.
Benefits: your Israeli and US work credits can't be combined to qualify for a benefit.

We cover Israel's side in Bituach Leumi: Israel's national insurance.

Filing both returns: a calendar

January to April: gather Israeli pay slips (tlush maskoret) and the annual employer summary (Form 106), plus US 1099s and brokerage statements.
April 15: FBAR due (automatic extension to October 15) [8]. US tax payments are due too, even with the June extension.
Spring: Israel's annual return is due for those required to file, such as the self-employed, people with foreign income to report and higher earners. Many salaried employees with a single job don't have to file, but may file to claim refunds.
June 15: automatic US filing deadline for Americans abroad [4].
October 15: extended US filing deadline [4].

Keep a running list of Israeli tax paid, converted at the rates the IRS accepts, so the foreign tax credit is straightforward.

What to do first

Note your arrival date. It sets your residency and your 10-year clock.
Open a file with the Israel Tax Authority if you're self-employed or will have income to report.
List every US account for FBAR, 8938 and, if you arrived in 2026 or later, Israeli reporting.
Decide exclusion vs credit before you file your first US return from Israel.
Talk to a cross-border preparer if you have US rentals, a business or retirement withdrawals.

Swap preparer tips and war stories in our community group for Americans in Israel.

Israeli taxes for Americans: how they fit with your US return