Interior Ministry updates eligibility criteria for property tax discounts

Revised guidelines calculate income per person and omit allowances, allowing greater access for middle-income families.

Money bills

(photo credit: Created with ChatGPT)

ByLIAT RON

JULY 8, 2026 16:05

About 100,000 additional households are projected to qualify for property tax reductions from 2026 onward, while local authorities may lose roughly NIS 1.1 billion in revenue. These outcomes follow the Interior Ministry's new reform on discount eligibility, which revises income assessment methods. The findings come from an analysis by the Finance Ministry Chief Economist Department.

Previously, discount eligibility followed a model that favored larger households according to the review. Updated rules adjust both the calculation method and applicable discount percentages.

Eligible households should increase by around 100,000, rising from 740,000 to approximately 840,000, marking a 13 percent gain. Meanwhile, total income-tested discounts are forecast to climb from NIS 2.2 billion to about NIS 3.2 billion, a 49 percent rise.

Roughly 91 percent of households already receiving discounts will see higher rates, while just 0.3 percent face reductions. The average discount rate for qualifying households will increase by about 25 percentage points. Over half of all discounts, or 59.5 percent, will fall into the top 90 percent tier.

The broader discounts are set to reduce local authority revenues by around NIS 1.1 billion. Weaker municipalities will feel the strongest effects. In socio-economic cluster 1 areas, revenue loss could reach 7 percent of the flexible budget used for resident services. Overall discounts under the new model equal 24.8 percent of that budget, with a per-resident shortfall of NIS 170.

Regional differences appear as well. Central areas show mostly single-digit discount rates relative to flexible budgets, whereas Nazareth and Acre districts see gains near 10 percentage points after the update.

Substantial benefits extend to middle deciles. First-decile eligibility stays near 90 percent, yet the second and third deciles rise from 51 percent to 64 percent. The fourth through sixth deciles also advance from 18 percent to 20 percent.

One factor is the income calculation method, which omits several National Insurance allowances such as child, old-age, survivors, and disabled-child payments. This allows some households to reach higher discount tiers despite income levels used for decile placement.

Population group variations exist too. Haredi households show the highest eligibility. Under the prior model 60 percent qualified, now rising to 65 percent. Average discounts for Haredi households reach about NIS 4,600. Arab society records the largest eligibility jump, up 7 points to roughly 53 percent.

The reform leaves employment incentives unchanged, with eligibility not tied to workforce participation or earnings potential. Verification still relies on manual document submission instead of direct National Insurance data transfers. Current utilization stands at about 40 percent.

Analysts note that lowering discount rates by 5 percentage points could save around NIS 250 million. Adjusting qualifying income thresholds would also limit benefits reaching beyond the lowest-income groups.