Tax exemption for the disabled

Who qualifies as disabled?

  1. 100% disabled.
  2. Blind.
  3. A 90% relative disability that precludes employment.

In order for a disabled citizen to receive exemption under the disability exemption law, the citizen is required to apply to The National Insurance office’s health committee. The health committee will assess and rule on the disabled person’s eligibility for exemption under law.

Should the disabled person be defined as completely disabled (100%), then no distinction is made concerning use or non-use of any limb. The disability can be a physical, emotional or intellectual (mental) impairment.

Level of blindness will be assessed and benefit will be set by the health committee.

Should the disabled person be impaired in a number of limbs, the health committee has the right to set separate benefit levels relative to each impaired limb.

In order to qualify for the exemption under law, the overall partial disability must exceed 89.5%. At that point, the handicapped person’s disability is rounded upward to 90%. To compute the handicapped person’s level of disability, double the percentage disability assigned by the health committee to each limb and total each, doubled percentage, up to 100%.

Term of Disability

  • Less than 6 months: No reduction in taxes.
  • 6 months or more, up to 1 year: Exemption from tax on the first 73,800 NIS of income from any source (earned or unearned); provided that the income was realized during the term of disability.
  • 1 year or more: Exemption from tax on earned income (business, employment, etc.) up to 615,600 NIS per year. (א5)9. Partial year disability requires matching the exemption only to the income realized during the course of the liability.

Limited exemption on bank interest

A person injured in a vehicular collision may be classified as disabled. Any injury settlement money invested by the injured is exempt from tax on up to 303,600 NIS of interest income from invested settlement monies. This is provided that the injured derives no income from any other source.
Should the injured have earned income of less than 303,600 NIS, he is exempt from tax in interest from invested settlement monies to the extent that the unearned income from said investment, plus his earned income, equals less than 303,600 NIS.
Accordingly, if the injured person’s earned income is at least equal to 303,600 NIS, there is no exemption on interest on invested settlements.

Note: Above figures are current for 2019