US-Israel Tax Treaty
The US-Israel Tax Treaty (1975) sets foreign tax credits and residency tie-breakers. Since 2026, new olim must separately report worldwide income and assets to Israel's Tax Authority even though the 10-year exemption on paying tax still applies.
The US-Israel Tax Treaty is the 1975 bilateral convention that allocates taxing rights between the United States and Israel, covering foreign tax credits, tie-breaker residency rules, and pension and investment income. As of 2026, the treaty itself has not been renegotiated, but Israel's disclosure rules around it changed sharply: new olim and returning residents who become Israeli tax residents on or after January 1, 2026, must now report worldwide income and foreign assets to the Israel Tax Authority from day one, even though the 10-year exemption on paying tax on that income still applies.
What Does the US-Israel Tax Treaty Actually Cover?
The treaty allocates taxing rights on income earned across both jurisdictions and sets out foreign tax credit mechanics for people subject to tax in both countries. It also fixes tie-breaker rules for anyone who would otherwise count as tax-resident in both the US and Israel, plus specific treatment for pensions, dividends, interest, royalties, and capital gains. A permanent-establishment definition governs when a business operation in one country triggers tax exposure in the other, and a mutual administrative assistance clause lets the IRS and the Israel Tax Authority (ITA) exchange information for routine compliance and audits.
When Was the Treaty Signed and Has It Changed?
The treaty was signed in 1975 and has been amended through protocol arrangements since, most recently on the administrative and information-sharing side rather than the core tax-allocation rules. The treaty's income-allocation and credit provisions have stayed stable for decades; the real activity since 2024 has been on Israel's domestic reporting law, not the treaty text itself.
What Changed for Olim and Returning Residents Starting 2026?
A April 2, 2024 amendment to Israel's Income Tax Ordinance ended the reporting exemption for new immigrants and returning residents who become Israeli tax residents on or after January 1, 2026. The Jerusalem Post reported in May 2026 that this closes what it called a hole in the wall: people who still qualify for the 10-year exemption on paying Israeli tax on foreign-source income must now file annual returns disclosing worldwide bank accounts, investment holdings, foreign companies, and trusts where they are a settlor or beneficiary. Nefesh B'Nefesh's 2026 guidance confirms the ITA also expanded Form 150 to capture additional detail on foreign entities held by the taxpayer. Anyone who became an Israeli resident before the January 1, 2026 cutoff keeps the older no-reporting exemption for their remaining benefit years.
A separate 2026 State Budget measure adds a new benefit rather than a new burden: new olim and returning residents who moved to Israel between November 5, 2025 and December 31, 2026, after at least ten years abroad, qualify for 0% Israeli income tax on Israeli-source earnings for two years, phasing in through 2030, according to reporting compiled by CWS Israel and YeahThatsKosher in 2026. That benefit sits alongside the treaty and the 10-year foreign-income exemption, not in place of either.
How Does the Treaty Interact With FATCA and Worldwide Disclosure?
FATCA reporting runs on a separate track from the treaty: it obligates Israeli financial institutions to report US-citizen account holders directly to the IRS under the US-Israel FATCA intergovernmental agreement, regardless of treaty residency rules. Israel's new worldwide disclosure regime adds a second, Israel-side layer, requiring the taxpayer's own annual disclosure to the ITA. Under the OECD Common Reporting Standard, Israel can also share account data automatically with other treaty partners, per reporting from International Tax Blog in late 2025. A US-Israeli dual filer is now working three overlapping systems at once: the 1975 treaty, FATCA bank-level reporting, and Israel's 2026 taxpayer-level disclosure regime.
What Should a US-Israeli Taxpayer Check Now?
Anyone weighing aliyah timing, an existing foreign trust, or a cross-border holding structure should confirm three things before year-end: their Israeli residency start date against the January 1, 2026 cutoff, whether Form 150's expanded fields apply to their specific foreign entities, and whether the 2026 two-year 0% Israeli-source income benefit applies to their arrival window. Coordinated US and Israeli tax counsel is standard practice here, since the treaty, FATCA, and the new disclosure regime are administered by different authorities with different filing deadlines.
Frequently Asked Questions
Do new olim still get Israel's 10-year foreign income tax exemption?
Yes. The exemption from paying Israeli tax on foreign-source income for ten years is unchanged. What changed is that residents arriving from January 1, 2026 must report that income and the underlying foreign assets, even though it stays tax-exempt.
Does the US-Israel tax treaty require reporting foreign trusts?
The treaty itself does not set disclosure rules. Israel's own 2026 reporting amendment does: trusts with a settlor or beneficiary who is a new immigrant are subject to reporting to the Israel Tax Authority.
Is FATCA the same as Israel's worldwide disclosure regime?
No. FATCA requires Israeli banks to report US-citizen accounts to the IRS. Israel's worldwide disclosure regime is a separate, newer requirement that the taxpayer report their own worldwide income and assets directly to the Israel Tax Authority.
Related Olam Coverage
Aliyah Tax Reform 2026 · FATCA · Worldwide Disclosure Regime · Family Offices
Page last reviewed: September 2026. Reporting-rule details reflect Nefesh B'Nefesh, The Jerusalem Post, AACI, and CWS Israel 2026 guidance; readers should confirm current filing requirements with the Israel Tax Authority and a qualified cross-border tax advisor before making residency or disclosure decisions.