A bill granting tax exemptions to olim (new immigrants) and returning residents for the first five years after making aliyah was advanced by the Knesset’s Finance Committee and approved on Tuesday to undergo final readings in the Knesset plenum.
The bill falls under the framework for the 2026 state budget, which, by law, must be voted on in its final second and third readings by the end of the month, when the fiscal year ends.
Olim, along with returning residents who have lived abroad for at least 10 years, will be eligible for the tax exemption. Once approved, the exemption will apply to those who arrived in Israel on or after November 5, 2025.
Under the proposal, the tax exemption will apply for income earned or accrued in Israel during the tax years 2026-2030, up to a defined ceiling.
The tax exemption ceilings vary over the five-year period.
In 2026, the maximum tax exemption ceiling will be NIS 600,000, rising to NIS 1 million in 2027 and 2028. The ceiling will then decrease to NIS 350,000 in 2029 and NIS 150,000 in 2030.
Additionally, the committee introduced an amendment stating that if a relative employs an oleh or returning resident, the exemption will be capped at NIS 140,000 per year, with a lower ceiling.
The proposal states that the bill includes a mechanism to prevent individuals from immigrating or returning to Israel solely to benefit from the tax exemption and then leaving the country.
The Finance Ministry estimated the cost of the tax benefit would amount to approximately NIS 560 million over five years.
The purpose of the benefit is to encourage as many people as possible to immigrate in 2026, representatives of the Aliyah and Integration Ministry stated in the Finance Committee discussions.
The ministry added that given the difficulty of initial absorption into the country, financial support in the early years is critical, and economically, “the cost is expected to pay for itself.”
The Israel Tax Authority has noted that the benefit will primarily affect populations with relatively high earning capacity and groups that have been less affected by previous benefits aimed at creating an incentive for aliyah.
The goal of the bill was also to create an incentive for employment within Israel, since olim already receive a full tax exemption on income from abroad for 10 years from the time of their aliyah, the Tax Authority said.
According to data presented to the committee, approximately 10,000–12,000 olim are employed each year, starting one year after aliyah. The average monthly salary olim earn is about NIS 8,000 per month.
Smotrich: 2026 is the 'year of revolution in aliyah'
Following the committee vote to advance the bill, Finance Minister Bezalel Smotrich called 2026 the “year of revolution in aliyah” in a post on X/Twitter.
He added that this was not just a slogan but “a practical work plan.”
“Zionism has always rested on three pillars: settlement, security, and immigration,” he wrote.
“In security, we have been heavily investing over the past two and a half years, and especially now, in a war that is reshaping the region and our strategic posture. In settlement, we are carrying out a real transformation in Judea and Samaria, the Negev, the Galilee, and the Golan.”
The finance minister called on Diaspora Jews to make aliyah.
“I call on our brothers and sisters overseas: come home,” Smotrich added.
Last month, the Knesset passed a bill that exempts US olim who are obligated to pay US Social Security taxes from making National Insurance Institute contributions for five years after they make aliyah.