With the approval of the state budget, the 'spacing of income tax brackets' went into effect, which focuses on changing the boundaries of the two main tax brackets.
This is a significant change in taxation policy in Israel, which will be reflected in upcoming paychecks.
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''Tax bracket widening' is intended to ease the tax burden imposed on middle-class employees and allow employees earning average salaries or above to benefit from an addition of hundreds of shekels to their monthly net salary.
The Tax Authority has already instructed the service bureaus and payroll managers to update the deduction systems in accordance with the new tables, which went into effect retroactively last January.
At the center of the reform is the expansion of the income ranges of those who pay the 20% and 31% tax brackets.
Until now, many workers have found themselves moving into a significantly higher tax bracket with every small salary increase, a fact that has made employees think carefully before choosing to increase the scope of their work and earnings.
Now, after the changes, all those who earn up to 19,000 NIS will only pay 20% tax.
This is a direct savings for anyone in the salary range between 16,000 and 25,000 NIS. Estimates from finance economists indicate a net increase that will range between 400 and 800 NIS per month, depending on the credit points and the exact level of the employee's income.
Because the change applies retroactively from the beginning of the tax year, employees are expected to see in the upcoming slip not only the current update but also tax returns for the months of January to March.
The Tax Authority clarifies that for most employees this is an automatic process that does not require the submission of special requests.
However, anyone who made a tax adjustment at the beginning of the year and whose income exceeds the new threshold will receive a revised certificate from the Authority proactively.
At the same time, the validity of last year's tax adjustments was extended until mid-May, to ease pressure at service centers.
