Exemption from Income Tax

A person who has been ill or injured is entitled to an exemption from income tax up to 7 years retroactively, regardless of continued activity in his current occupation.

Many workers and pensioners are not aware that their physical condition entitles them to a tax exemption. For example: a person with diabetes is entitled to 65% disability. To this 65% status,  percentages will be added for other injuries and illnesses as they occur.  Over 89.1% disability warrants a tax exemption as well as retroactive reimbursement of income tax.

If the degree of medical disability determined by the medical committee is lower than 90%, the committee’s decision can be appealed. The appeal must be submitted by delivering a decision letter from the assessor.

What is the tax exemption threshold?

• Personal income – exemption on income from personal income (wages from work) for a period of 365 days or more is currently NIS 628,800. In order to receive the full exemption, the disability period must be at least 365 days (year).
• Capital income – Exemption on capital income (income from property, dividends, interest on securities and bonds traded on the stock exchange) currently stands at approximately NIS 73,360. Please note – if the disability period is between 185 and 365 days – the amount of the personal income exemption will be the same as the exemption on capital income.

Who is eligible?

1.  Those who have a cumulative disability of at least 89.1% as a result of several medical problems (one of the problems must be at a rate of at least 40%).

2. The disabled who are entitled to a disability allowance or are victims of terror, a minimum disability for one medical issue of 40% is not necessary.  Only a cumulative disability of 89.1% is needed.  

3. Those with 100% disability as a result of one medical problem.

The relevant Committees that determine tax exemption

• Committees of the National Insurance Institute regarding various disabilities.

• Committees for the purpose of exemption from income tax held by the National Insurance Institute.

• Ministry of Defense Committees – according to the Law on the Disabled (Compensations and Rehabilitation).

• Committees of the Ministry of Finance – according to the Nazi War Disabled Persons Law / Nazi Persecution Disabled Persons Law.

• Committees of the Ministry of Finance – according to the Law on Compensation for Ringworm / Polio Victims.

Conclusion

So there you have it—everything you need to know about tax exemptions for folks dealing with health issues. From getting your income tax back for up to 7 years, to understanding your disability rating and what that means for your wallet. And hey, if you think the medical committee’s got it wrong, you even have the option to appeal. It’s important stuff that not everyone knows about, so make sure you’re clued in. After all, health issues are tough enough; there’s no reason your finances should take an extra hit.