Gross is the amount before deductions; net is the amount that remains after the relevant deductions.
Income tax on work has brackets: a higher rate may apply only to the portion that exceeds the bracket threshold, not to the entire salary. Tax credit points and benefits may reduce tax. A pay slip may also include national insurance, health and pension contributions. Pension is savings and a contribution, not simply another tax. Age, income, status and additional conditions affect calculations; do not use the example as a real salary calculator.
A worked example and a common misunderstanding
Use fictional tax bands for this exercise, not Israeli tax bands: the first 1,000 units are taxed at 10%, and the next 1,000 at 20%. Income of 1,500 produces tax of 100 plus 100, totalling 200. The marginal rate is 20%, while the average rate is about 13.3%. Entering the second band does not apply it to all income. Credits, deductions and other rules are omitted to isolate the mechanism.
Concepts that help you compare
Tax bands and credit points, step by step
Marginal tax applies to the last slice of income. Effective tax is total tax divided by income. They are different numbers. Israel’s April 2026 monthly earned-income bands are: 10% up to ILS 7,010; 14% on the next slice up to 10,060; 20% up to 19,000; 31% up to 25,100; 35% up to 46,690; and 47% above. A 3% surtax applies to the excess above the equivalent of ILS 60,130 per month when income is constant. Tax is annual; annual thresholds are 12 times these amounts. Moving up does not change tax on earlier slices. One credit point reduces tax by ILS 242 per month or 2,904 per year. Entitlement must be checked; deductions reduce taxable income, whereas credits reduce tax. Unused points are not cash. National insurance, health, pensions and other relief are separate.
Comparison example: At ILS 15,000 taxable monthly income: 7,010 × 10% = 701; 3,050 × 14% = 427; 4,940 × 20% = 988. Tax before credits is 2,116. Assuming 2.25 points, deduct 544.50: tax is 1,571.50. The marginal rate is 20%, but the effective rate is about 10.48%. At ILS 20,000 only 1,000 is in the 31% band: tax before credits is 3,226 and after the same credit, 2,681.50.
Read the full guideNational insurance and health insurance contributions
These are compulsory payments governed by rules separate from income tax, related to the social security and health systems. National insurance operates allowances and pensions according to eligibility, for example in childbirth, disability and unemployment. Health insurance contributions are related to funding the health system. This does not mean every medical service is provided without additional payment. The liability depends among other things on age, status and the type of income; workers, self-employed and those not working may have different rules. Children and teenagers have relevant arrangements and exemptions — do not automatically apply an adult’s calculation to them.
Comparison example: If a sample pay slip shows two different deductions for national insurance and for health, record each one once. Do not add the total amount of both again.
Read the full guide