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.

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.

Use Money lab to compare 19,000 and 20,000 with the same points. Which slice changed?