Last Updated 6 months ago

Last week (February, 2026), the Knesset unanimously passed an amendment to the National Insurance Law giving new Olim from the United States a five-year exemption from Bituach Leumi (Israeli National Insurance).

If you’re paying US Social Security or self-employment tax, you no longer have to double-pay Israeli National Insurance for your first five years in the country.

This changes everything. Not just the tax numbers. The entire way we think about structuring income for Americans making Aliyah.

I know because I had three consultations the same day the law passed, and the conversations we would have had 24 hours earlier would have been completely different.

Key Points

• The exemption covers Bituach Leumi contributions (not Bituach Briyut (health insurance), which is separate)
• You must be a new oleh and demonstrate active US Social Security obligations
• The exemption is for five years from the date of Aliyah
• The bill was initiated by MK Simcha Rothman and advanced through the Labor and Welfare Committee

The Problem This Solves

Unlike the U.S.’s tax treaties with dozens of other countries, there is no totalization agreement between Israel and the United States. A totalization agreement prevents citizens from paying social security in two countries simultaneously.

Without one,  new American olim working remotely have often been stuck paying both U.S. Self-Employment Tax (15.3% on the first ~$180K, 2.9% above that) and Bituach Leumi (approximately 12% on Israeli income for self-employed). For self-employed olim earning $150K, the combined social security burden could easily exceed $40,000 per year between both countries. That’s before a single shekel of income tax. 

According to Nefesh B’Nefesh, this double payment has been one of the primary financial barriers causing Americans to delay or reconsider Aliyah entirely.

What the New Law Does

Starting immediately, new olim who demonstrate they are obligated to pay U.S. Social Security taxes will be exempt from Israeli Bituach Leumi contributions for their first five years in Israel.

What the Law Actually Says

Here’s what the Knesset passed, stripped of the legal jargon:

Who qualifies: Any new oleh within their first five years who is subject to U.S. Social Security tax (FICA) or US self-employment tax.

What you get: A full exemption from Bituach Leumi contributions for five years from the date of Aliyah.

What you still pay: Bituach Briut (health insurance). This is a much smaller amount. Think of it as Israel’s version of Medicare. You keep full health coverage.

Your benefits are protected: The Treasury compensates Bituach Leumi directly. It counts as if you’re paying. You don’t lose eligibility for future benefits… You can thank the rest of us who pay full taxes later :).

It’s temporary: The provision lasts 5 years. The labor minister can extend it in two additional five-year increments with the finance minister’s consent and Knesset committee approval.

It applies to everyone: Employed (W-2), self-employed (Schedule C/SE tax), it doesn’t matter. If you’re paying into the US system, you qualify.

How do the years work?

The years involved get confusing, so let’s try to iron that out. The law exempts the first 5 years of Aliyah that fall within the timeline of 2026 through 2035. 

If you made Aliyah in 2024, you already paid taxes for those first two years. The money you paid for 2024 & 2025 is gone. Now your next three are exempt, though. So you get some benefit, but not retroactively. If you made Aliyah in 2019, even though you are within the first 10 years, you do not qualify for any benefits.

If you make Aliyah in 2026 through 2030, you get the full five-year benefit. However, if the law is not extended, if you make Aliyah in 2033, for example, you will start paying Bituach Leumi in 2036 (since the law expires). So again, only a partial benefit. 

This all makes sense when you remember that the goal is to get more Americans to Israel sooner. Now, with all that year jumble out of the way, who doesn’t get this incredible benefit?

Who Does It Not Help?

If you are a new oleh between years 6-10 of your Aliyah, you get no benefit. You still don’t have to report your exempt income under the first 10 years, like those who came after 2025. But you still have to pay Bituach Leumi on your Israeli-source income. 

Also, all those accidental Americans are still out of luck. If you were born in Israel to US parents or moved to Israel years ago at a young age, think twice about opening up an esek. You will still need to pay both Bituach Leumi and U.S. self-employment tax.

For those lucky new olim who do qualify for this benefit, you aren’t out of the woods on everything. U.S. income tax filing obligations are completely unaffected, and you must still file with the IRS every year as a U.S. citizen.

After five years, you return to the current system, paying both Bituach Leumi and U.S. Social Security tax. That is, unless you change your structure after the five years and switch to being employed here in Israel. Or unless a permanent totalization agreement is eventually reached, and the double payment is ended more permanently.

Israeli income tax is also unaffected. The maximum Israeli income tax is still 50% (47%+3% mas yesef). So, if you are a high earner here in Israel, which may mean something different than in the U.S., you will still get to that highest bracket. It will just take you longer to get there. 

How This Changes the Structuring Conversation

At Philip Stein & Associates, a significant portion of our work with new olim involves entity structuring to minimize the double social security hit. If you made Aliyah and are using your old U.S. accountant, you may be missing tax-planning opportunities. Not just because of this new law. You can read why it is important to switch when making Aliyah to someone here in Israel.

Even if you have your structure set up, if you are within the first five years of Aliyah, you may want to rethink it. The door is wide open for remote workers working for their U.S. employer. As long as that employer isn’t worried about corporate taxes in Israel, that may be the way forward. 

Alternatively, S-corporations are looking much more attractive to minimize Social Security tax, while being entirely exempt on Bituach Leumi. Where an LLC or payroll company may have been the solution before, doing your own thing may be the new best option.

The bottom line. Structure plans should be rethought with advisors who understand both sides of the ocean and can guide you appropriately. That is exactly what we do at Philip Stein & Associates, so if you are making Aliyah or have recently made Aliyah, check out our website and get in contact. 

What Should You Do Now?

Well, if you are still in the United States, you should jump on a plane and come over! 

If you’re planning Aliyah, this removes one of the biggest financial obstacles. Get your tax structure planned before you move so you can maximize the benefit from day one. If you just made Aliyah, talk to us about whether your current structure is still optimal. You may be overcomplicating things. 

If you’ve been here for more than five years, unfortunately, this doesn’t directly change your situation. But it’s a positive signal that the government is paying attention to the totalization issue. Advocacy for a broader solution continues. 

But even with this incredible benefit, your salary may have just taken a dive this past year. Here is our article on why, and what you can do about it!