Oleh Hadash Tax Planning — A 2026 Exemption Guide
If you made (or are making) Aliyah between November 5, 2025 and December 31, 2026, you qualify for one of the most generous Israeli tax breaks in recent memory: a tiered income-tax exemption that maxes out at ₪1,000,000/year for years 2 and 3 of residency. Total tax-free income over five years can reach roughly ₪3.1 million if you plan correctly.
This article covers what the law gives you, when it expires, and how to optimize.
The 2026 Oleh Hadash law in 60 seconds
Passed by the Knesset on March 30, 2026 (retroactive to November 5, 2025). Anyone who became an Oleh Hadash in the eligibility window gets a tiered annual exemption from Israeli income tax on Israeli-source employment income:
| Year of residency | Annual exemption cap |
|---|---|
| Year 1 | ₪600,000 |
| Year 2 | ₪1,000,000 |
| Year 3 | ₪1,000,000 |
| Year 4 | ₪350,000 |
| Year 5 | ₪150,000 |
| Year 6+ | expired (no exemption) |
Critically: the exemption is on top of existing credit points (3 / 2 / 1 over months 1–18 / 19–30 / 31–42 — see the tax-brackets article). The two stack.
What counts as "Israeli-source employment income"
Covered:
- Salary from an Israeli employer (the standard case)
- Bonuses, RSUs, ESPP, and other equity from your Israeli employer (subject to the cap)
- Self-employment income from work performed in Israel
Not covered by this law:
- Foreign-source passive income (interest, dividends, rental income from abroad — those have their own 5/10-year exemption under §14)
- Capital gains on foreign assets you owned before Aliyah (different §14 regime)
- Work performed for a relative — capped separately at ₪140,000/year within the broader cap
- Israeli employment income above what the cap allows for that year
Optimizing within the cap
The structure rewards timing high-income events to land in years 2–3, when the cap is ₪1M. Concrete strategies:
RSU vesting
If you have control over your vesting schedule (sign-on grants are sometimes negotiable), front-load vesting into years 2 and 3 of Israeli residency, where the cap is highest. A ₪1M vesting event in year 2 is fully exempt; the same event in year 4 only the first ₪350k is exempt — the rest is taxed at marginal rates. The difference can exceed ₪200k in tax saved.
For grants under Section 102 + trustee, see the stock-options article — the 25% capital-gains track interacts with the Oleh Hadash exemption: capital gains on equity sold 24+ months after grant aren't covered by the Oleh Hadash exemption (which applies to employment income), but they're already at the favourable 25% rate.
Bonus timing
If your bonus payment date is flexible (some employers can shift it by a month or two on request), think about which year of residency it would land in. Shifting a bonus across the boundary between a low-cap year and a high-cap year can save 35–47% on the difference.
Credit points
Even within the exempt portion, credit points still reduce Bituach Leumi — which is computed separately from income tax and isn't covered by the Oleh Hadash exemption. So the points aren't "wasted" on tax-free income. They reset monthly, so unused months can't be carried forward.
Years 4–5 are tighter
Caps of ₪350k and ₪150k mean most hi-tech salaries will exceed them. Plan accordingly: any income above the cap in those years is taxed at normal rates. This is when a strong pension and Keren Hishtalmut contribution matters most for tax efficiency — both reduce taxable income outside the exemption.
The 2026 law vs §14 (the older passive-income regime)
The 2026 Oleh Hadash law is separate from Section 14, which exempts Olim Hadashim from Israeli tax on foreign passive income for 10 years. Both regimes can apply simultaneously:
- §14 covers your overseas portfolio, foreign rental income, and foreign dividends.
- The 2026 law covers your Israeli employment income.
If you have significant foreign assets and you're earning at an Israeli hi-tech salary, both will be active. Coordinate with an accountant who handles both.
Working for a relative
The law caps employment income from a relative at ₪140,000/year within the larger annual cap. Added to prevent tax-free salary "loops" between family members. If your Israeli employer is family, factor this in.
Run the calculator with 2026 Oleh Hadash exemption: enabled for each year (1–5) to see your specific savings. The exemption is a temporary order with specific definitions that depend on facts — for individual planning, especially with dual residency or foreign employment relationships, consult a licensed Israeli accountant who specializes in Oleh Hadash tax.