TL;DR:
- Bituach Leumi caps at ~₪50,695/month (~₪608,340/year) in 2026.
- Above the cap: NII drops to zero — ~12% marginal saving (employees).
- Multi-employer earners often overpay NII and must reconcile annually.
- Passive dividends and capital gains are outside NII entirely.
- The cap, combined with the income-tax surtax, creates the unusual outcome that comp above ₪608k has a LOWER marginal rate than comp at ₪400k for some structures.
The 2026 Cap Numbers
- Ceiling: 5 × the average wage = ~₪50,695/month = ~₪608,340/year.
- Lower band threshold: ~60% of average wage = ~₪7,522/month.
- Average wage (basis): ~₪10,139/month (2026 figure).
All figures update each January with the official average-wage notice.
Marginal Rate Stack at Each Bracket
| Monthly income range | Income tax | NII + Health | Combined marginal |
|---|---|---|---|
| ₪0–7,522 | 10–14% | 3.5% | ~17% |
| ₪7,522–50,695 | 20–47% | 12% | up to 59% |
| ₪50,695–~60,000 | 47% | 0% | 47% |
| ~₪60,000+ (surtax) | 50% | 0% | 50% |
Notice the inversion: marginal tax DROPS at ₪50,695 then rises slightly with the high-income surtax. This shape drives Israeli comp planning.
Multi-Employer Surplus Refunds
Each employer's payroll system treats your salary as if it's your only source. If you have two employers each paying ₪40,000/month:
- Each withholds NII on full ₪40,000 (both below the per-employer ceiling).
- Combined ₪80,000/month — only the first ₪50,695 should bear NII.
- Surplus NII of ~12% × (₪80,000 − ₪50,695) ≈ ₪3,517/month overpayment.
- Annual surplus ≈ ₪42,000 — refundable via Form 6101.
The Self-Employed Twist
Self-employed advances (Mikdamot) often assume standalone income. A founder with ₪500k salary AND ₪500k consulting income on the side will dramatically overpay NII unless they coordinate the advances. The annual reconciliation refunds the surplus but at the cost of working-capital lock-up for 12+ months.
Comp Planning Implications
- Bonus structuring: piling a year-end bonus on top of base above the cap costs only 47-50% (no NII) vs 59% on regular salary in the middle bracket.
- Founder dividends: dividends from active participation incur 30-33% income tax but NO NII. Effective 30-33% vs 59% combined on salary in the upper-middle band.
- Equity vesting: Section 102 capital-gains track avoids NII on the capital-gain portion — see our RSU guide.
- Spousal allocation: couples filing jointly can shift income to use TWO sets of caps (separate ceilings per individual).
Audit and Compliance
- Multi-source earners SHOULD file Form 6101 annually within 12 months of year-end.
- NII recalculation looks back up to 7 years.
- Refunds carry no interest from NII — submit early.
- Olim during the 12-month grace also benefit from coordinating with the home-country social-security agency (Totalization Agreement) — see our Bituach Leumi for Olim guide.
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