The 2026 tax year is coming to an end, and if there is one thing you should not postpone to the last minute, it is handling your affairs with the Tax Authority. Although the end of December still seems distant, now is the ideal time to prepare: Summarizing income, gathering expenses, and preparing for set-offs to ensure you maximize all your rights. It is important to remember that this applies not only to self-employed individuals – salaried employees can also benefit from tax refunds. Accurate advance planning can save you a significant amount of money and even secure a nice refund into your bank account from the Tax Authority. So where do you start? CPA Yoram Shifer clarifies the process and outlines the essential steps that both employees and self-employed individuals must take right now.
Self-employed and licensed dealers
Deposit up to NIS 38,412 into pension funds to save up to NIS 16,000 in tax
Up to 11% of qualifying income is recognized as a deduction, and an additional 5.5% receives a tax credit of 35% of the deposited amount. The maximum qualifying deposit for benefits in 2026 is NIS 38,412 out of a qualifying income of NIS 232,800. A self-employed individual in the 35% tax bracket who deposits the maximum sum saves approximately NIS 13,000 in tax annually, while for someone in the 47% tax bracket, the savings approach NIS 16,000. Alongside this, those who have not yet opened an advanced study fund (Keren Hshtalmut) can deduct a deposit of up to NIS 13,203. The benefit applies strictly to amounts actually deposited by December 31.
Had a profitable year? Bring forward expenses to December
A profitable year is an opportunity to bring forward current expenses and reduce taxable income; in a weaker year, it is better to defer some expenses to the following year. This tool works primarily for businesses reporting on a cash basis. For a business reporting on an accrual basis, advance payment for 2027 advertising will not reduce this year's tax, and equipment is recognized through depreciation over several years anyway. At the same time, exempt dealers must monitor their turnover: The threshold in 2026 is NIS 122,833, measured by total receipts rather than profit. Exceeding the threshold requires transitioning to a licensed dealer status.
About to cross a tax bracket? Issue the invoice in January
Income tax is calculated on an annual, progressive basis. Therefore, a self-employed individual expected to cross a bracket in December will pay 31% instead of 20% on the final shekels, or 47% instead of 35%. Those who can defer income recognition – for example, by issuing an invoice in January instead of December – will save the difference. The logic also works in reverse: Someone who had a weak year and is in a low bracket can bring January income forward into the current year. This tool is mainly relevant for cash-basis reporters and should be reviewed with an accountant.
Pay National Insurance debts before the end of the year
52% of National Insurance payments, excluding Health Insurance, are recognized as an expense, but only for amounts actually paid by December 31. Postponing payment to January shifts the deduction a year forward; therefore, self-employed individuals whose income has increased should increase their advance payments now. Additionally, clearing fees, business credit card fees, and loan interest are recognized as expenses. An official statement should be requested from the bank, and managing payments in a separate business account makes proving the expense easier.
Customer gifts recognized up to NIS 240; employee holiday gifts attributed as salary
Gifts to customers and suppliers are recognized as expenses up to NIS 240 per recipient per year, provided the recipient's name is recorded and documentation is retained. Any amount exceeding this is non-recognized and adjusted for tax purposes. Employers must distinguish between two types of gifts: A gift for a family or personal event, such as a wedding or birth, is tax-exempt up to that same amount, whereas a holiday gift is considered a taxable benefit and imputed fully to the employee's salary. For gifts given as physical items, the imputed value includes the VAT listed on the invoice.
Salaried employees
Check paystubs for pension contributions on bonuses
Many employers contribute to pensions only from base salary, excluding bonuses, commissions, overtime, and expense reimbursements. The difference is called uninsured salary, which can be identified on paystubs by comparing gross salary with the salary used for pension contributions. Employees may deposit up to 16% on this component independently and receive a tax refund of approximately 35% of the deposit. For an employee earning NIS 24,000 per month, of which NIS 9,700 is uninsured, this represents an annual deposit of about NIS 18,600 and a tax refund of approximately NIS 6,500.
Combat reservists eligible for up to NIS 11,616 in tax credit points
Since the beginning of 2026, combat reservists who served at least 30 days in the previous year are eligible for tax credit points under Section 39B of the Tax Ordinance. The benefit reaches up to 4 credit points, worth NIS 11,616 annually. Those whose paystubs do not reflect this benefit can claim it in their annual return. Furthermore, because income tax is calculated annually, many employees are entitled to refunds: Those who changed jobs, worked part of the year, worked in multiple places without tax coordination, completed a degree, gave birth, were unemployed, or are raising a child with special needs. Claims can be filed up to six years retroactively, and running a simulation on the Tax Authority website beforehand is recommended.
Have a side business? Open a second advanced study fund
Standard salaried employees rely on their employer, who is the only party permitted to deposit into an advanced study fund on their behalf, up to a salary cap of NIS 15,712 per month. However, an employee who also earns income from a business is not subject to this restriction: They may open an additional fund as a self-employed individual and make deposits themselves. The deposit is recognized as an expense up to 4.5% of qualifying income, capped at NIS 13,203 per year, and profits are exempt from capital gains tax on deposits up to NIS 20,566. The funds become liquid after six years.
In general, an employee's tax liability is calculated on an annual basis. Monthly deductions are made based on that month's salary, assuming it will repeat throughout the year. This represents an advance payment rather than a final calculation. Discrepancies arise from unpaid leave months, additional income without tax coordination, or unupdated credit points. Deposits to provident funds or donations made on January 1 already belong to the following year. Discrepancies can be claimed back, but only on the employee's initiative and separately for each completed tax year. Submissions are permitted after the end of the year and upon receiving Form 106 from the employer.
The application is submitted online using Form 135 available on the Tax Authority website, accompanied by documentation of both spouses' income from all sources, social contributions, and requested credits. Those finding it difficult to submit independently can turn to an accountant, tax consultant, or companies charging a percentage-based fee on the refund.
Employees and self-employed
Donated this year? Ensure the charity reported the donation
Donations to public institutions approved under Section 46 qualify for a 35% tax credit. The benefit starts at a cumulative amount of NIS 207 per year and is limited to donations up to 30% of taxable income. The realization mechanism changed this year: Starting January 1, 2026, all approved charities must report donations via the Tax Authority's "Israel Donations" system, and mid-year tax coordination will apply only to donations reported in the system. Manual receipts are no longer sufficient. Ensure identification details were provided to the charity at the time of donation and that the receipt appears in the personal portal on the Tax Authority site.
Sold real estate? Realize loss-making securities before December
Before the end of the year, it is customary to realize loss-making securities to set off losses against capital gains, and even against land appreciation tax when selling real estate. Securities can be repurchased immediately after the sale. Unused losses roll over to subsequent years only if an annual return is filed, as banks reset loss balances at the end of the year. Those with taxable income exceeding NIS 721,560 pay a 3% surtax on the excess portion, with an additional 2% added to the capital component; splitting a large realization between December and January can therefore save on taxes.
Returning to Israel? Benefit window closes December 31
A new temporary provision exempts personal exertion income produced in Israel – whether salary or business income – for individuals who became Israeli residents between November 5, 2025, and December 31, 2026. A veteran returning resident is defined as someone who resided abroad for at least ten consecutive years. The exemption accumulates up to NIS 3.1 million across 2026 through 2030: NIS 600,000 in 2026, NIS 1 million in each of 2027 and 2028, NIS 350,000 in 2029, and NIS 150,000 in 2030. In 2026, the cap is calculated proportionally to the period of residency, meaning anyone arriving in December will receive a significantly smaller exemption. A returning resident certificate from the Ministry of Aliyah and Integration is required.
CPA Yoram Shifer, managing partner at the Ziv, Shifer & Co. accounting firm, emphasizes that it is better to act promptly rather than wait for the end of December. "When the business year is 'still open,' it is possible to estimate income, bring forward or defer expenses, and maximize deposits," he says. "The window of opportunity is closing, and all that remains afterwards is chasing forms and hoping they are processed in time."