The ten-year exemption is why many people can afford to make aliyah, and it is also the most misunderstood topic before they arrive. It is genuinely generous. However, it is narrower than the version people discuss, and it does nothing about the tax system you may already be subject to.
The exemption applies strictly to Israeli tax. If you are a US citizen, it does not reduce your American liability by a single dollar - and it can quietly make it worse.
What the exemption actually is
A new oleh - and a veteran returning resident, meaning someone who was a foreign resident for at least ten consecutive years - is exempt from Israeli tax for ten years on all foreign-source income. This includes both passive and active income. In practice, this covers employment income earned abroad, business income, interest, dividends, rent, and capital gains on assets held outside Israel.
This is a substantial benefit worth planning around. The key questions to ask early are which of your assets actually produce foreign-source income, and whether the structures you already hold - an LLC, a trust, a pension - will be treated as you expect once Israel assesses them.
Which status applies to you
- New oleh - entitled to benefits similar to a veteran returning resident.
- Veteran returning resident - a foreign resident for at least ten consecutive years. Receives the full ten-year exemption on all foreign-source income.
- Ordinary returning resident - a foreign resident for at least six consecutive years. This status offers considerably less: a five-year exemption on pension, royalty, rent, interest, and dividend income from foreign assets acquired abroad after ceasing to be an Israeli resident (section 14(c)) - excluding employment or business income - and a ten-year exemption on capital gains from selling foreign assets acquired while a foreign resident, provided they are not rights in an Israeli asset (section 97(b)(2)).
| Ordinary returning resident | Veteran returning resident / new oleh | |
|---|---|---|
| Who qualifies | Foreign resident for at least 6 consecutive years | Foreign resident for at least 10 consecutive years, or an individual becoming an Israeli resident for the first time |
| Exemption on foreign income | 5 years - pension, royalties, rent, interest and dividends from foreign assets acquired after ceasing to be an Israeli resident. Not employment or business income | 10 years - all foreign-source income, including employment and business income |
| Capital gains on foreign assets | Exempt if sold within 10 years, for a foreign asset acquired while a foreign resident (not a right in an Israeli asset) | Exempt if sold within 10 years, for any asset held abroad |
| Reporting the foreign income | No special reporting exemption | Resident before 1 January 2026 - exempt from reporting. From 1 January 2026 - must report |
| Adjustment year | No | Yes - by notice within 90 days of arrival |
| Exemption on Israeli income (2026 aliyah law) | No | Yes - if residency began between 5 November 2025 and 31 December 2026, up to an annual cap |
The gap between six and ten years abroad is therefore not a mere technicality - it is the difference between a limited exemption and a comprehensive one. If you are close to the threshold, the exact date you resume Israeli residency can be worth a significant amount of money.
One trap to avoid: the Israel Tax Authority, the National Insurance Institute, and the Ministry of Aliyah each use their own definitions. Qualifying with one does not mean you qualify with another. Verify your actual status before filing paperwork or asserting a residency position.
It does not help you with the IRS
This is the single most common misconception, and I want to be entirely clear about it.
The United States taxes its citizens on worldwide income, wherever they live. Moving to Israel does not change that. A US citizen making aliyah remains fully inside the US system, must continue filing US returns, and must keep reporting foreign accounts. The Israeli exemption removes the Israeli charge. It does not affect the American one.
A second-order effect often catches people off guard. Where you would otherwise pay Israeli tax and claim a foreign tax credit against your US liability, the exemption means there is no Israeli tax to credit. The income is exempt in Israel but remains taxable in the US - meaning the financial benefit can ultimately accrue to the US Treasury rather than to you. Whether this happens depends on the income type and your specific circumstances. I strongly recommend modelling this before you move, rather than discovering it on your first post-aliyah tax return.
The same logic applies, albeit in a softer form, to other citizenship- or domicile-based systems. If you are arriving from the UK, the key question is what your domicile position looks like after the move, not just your residence.
The window closing 31 December 2026
A temporary order published in March 2026 does something the ordinary rules never did: it exempts Israeli-source personal-exertion income - such as your salary or business income earned here - and not only foreign income.
It applies to individuals who become Israeli residents for the first time, or veteran returning residents, between 5 November 2025 and 31 December 2026. The framework is as follows:
- Capped at declining annual thresholds - up to NIS 600,000 in 2026, and up to NIS 1 million in 2027-2028, tapering through to 2030.
- You must remain an Israeli resident in 2028 and 2029.
- You must spend at least 75 days in Israel in each of those years.
This is a temporary order with a strict deadline. If you are planning to arrive in the coming months, the financial difference between landing before and after 31 December 2026 is worth calculating now, rather than waiting until December.
Planning a move to Israel?
The decisions that matter are the ones made before you arrive.
Arrange a consultationThe adjustment year
As a new oleh or veteran returning resident, you may elect an adjustment year: a year in which you continue to be treated as a foreign resident for Israeli tax purposes, at the end of which you decide definitively whether to settle in Israel. You must give notice of the election within 90 days of arrival.
It sounds like a free option, but it is not. It can help, and in some circumstances it actively hurts. The adjustment year counts towards the ten-year exemption period rather than extending it, and it interacts with your other country's rules in ways that depend entirely on which country that is. I advise weighing this deliberately rather than electing it by reflex.
National Insurance is a separate system
Israeli National Insurance (Bituach Leumi) is not part of the income tax system, and your tax status does not carry across. A returning resident must re-establish residency separately using Form 628 - it is not automatic, and neither is health coverage: there is a waiting period of up to six months for medical entitlement, which can be bought out. New olim register for health insurance on arrival and generally have no waiting period.
Foreign advisors in particular tend to miss this, because most countries do not split the two systems the way Israel does. You can get the tax answer completely right and still leave your client without health cover for their first months in the country.
If you made aliyah from the US and pay US Social Security, a 2026 law may exempt you from Israeli National Insurance for your first five years - see the National Insurance exemption for US olim.
You must now report (Amendment 272)
This changed recently, and the older guidance still circulating has not caught up.
Historically, the ten-year exemption came with a matching exemption from reporting: exempt income did not have to be declared. Amendment 272, enacted in April 2024, abolished that. For anyone who became an Israeli resident on or after 1 January 2026, the position is now:
- The ten-year exemption from Israeli tax on foreign income still applies.
- The foreign income and assets must nonetheless be reported on an ongoing basis.
If you are arriving now, I recommend planning for annual Israeli filings from the start, even if you expect to owe nothing. The exemption survived; the quiet life did not.
If you take only one action, make it this: establish your exact status - and how many years you have actually been a foreign resident - before you land, file anything, or tell anyone you are back. That single fact drives almost everything above.