Visa holders · From Israel
Years after moving to the US from Israel, taxes on leaving can still fall due. By default, the exit tax waits until you sell, and Israel charges no interest for the wait.
The deemed sale under section 100A of the Income Tax Ordinance reaches most assets, section 102 equity included, and has no minimum value. Your Israeli real estate and personal belongings fall outside it. When you sell, Israel taxes the gain after inflation in proportion to the time you held the asset before your residence ended.
Updated · Sources
Israel’s top 2026 rates on gains and 102 equity
- 25%
- is Israel’s top rate on the part of a share or fund gain it taxes, before surtax. A substantial shareholder pays up to 30%.
- 47%
- is the top 2026 rate on section 102 equity taxed as pay, on income above NIS 560,280.
- 24 months
- is how long a trustee must hold section 102 shares on the capital-gains track for the 25% rate. At a listed company, the value up to the average share price before the grant is still taxed as pay.
Israel’s surtax adds 3% on 2026 taxable income above NIS 721,560, and 2% more on capital income above that line.
What ends your Israeli residence: your center of life or the day count?
Your center of life decides it, and the day counts only raise presumptions you can rebut. The day your residence ends is the date Israel’s exit tax uses.
Your center of life stays in Israel
Israel taxes you as a resident while your center of life is there. It weighs all your family, economic and social ties, from your permanent home to your workplace and business interests.
You spend 183 days in Israel, or 425 over three years
Israel presumes your center of life is there if you spend 183 days or more in Israel in a tax year. Its tax year runs January to December. It presumes the same at 30 days or more, if that year and the two before total 425 days or more. You or the assessing officer can rebut either presumption. A partial day in Israel counts as a full day.
You rebut the day count
If a presumption applies but you say you are not resident, attach Form 1348 to your Israeli annual return. The form lists your days, homes, family and work. You attach Form 6166, the IRS certificate of US residency, to it. Filing Form 1348 does not end your residence, because the center-of-life test still decides.
You stay abroad 183 days a year, two years running
Israel can also treat you as a foreign resident if you spend at least 183 days abroad in each of two tax years. Your center of life must then stay outside Israel for the two years after.
Hold shares six years before you leave and four after, and by default Israel’s exit tax reaches 60% of the gain after inflation.
You can choose to pay the exit tax when you leave instead of at the sale. If Israel would tax the later sale anyway, it taxes the whole gain rather than a time-based share.
Gain on the sale
NIS 1,000,000
That is the NIS 2,000,000 price less the NIS 1,000,000 you paid.
Share Israel taxes
NIS 600,000
Six of your ten years of holding came before your residence ended.
Israel’s tax at 25%
NIS 150,000
It falls due with the sale, four years after your residence ended.
Gain the US counts
The full gain
The US taxes the full gain from your dollar cost, at each date’s exchange rate. No treaty election resets your US basis to the value on leaving.
The example applies section 100A(d) and the 25% top rate, with no inflation or surtax. It leaves out the dollar amounts the US would use. The treaty exempts most of a US resident’s gains from Israeli tax. Whether that exemption reaches this deferred tax is unsettled, and so is whether the US credits it. Have your Israeli adviser and your US CPA settle both before you sell.
What can Israel still tax under the US-Israel tax treaty after you settle in the US?
The treaty mostly limits Israel, as the country where the income arises. Once you are a US resident, the US taxes your Israeli income in full and credits Israel’s tax within US limits.
| Israel | US | |
|---|---|---|
| Interest from an Israeli bank | Up to 17.5% Article 13(2) | Taxed With a credit |
| Dividends from an Israeli company | Up to 25% Article 12(2) | Taxed With a credit |
| Gains on shares and funds | Mostly exempt Article 15(1), with exceptions such as a 10% voting stake. Whether it reaches the exit tax is unsettled. | Taxed |
| A monthly pension from an Israeli fund | Exempt Article 20(1) | Taxed |
| A lump sum from an Israeli fund | Can tax it No treaty limit | Taxed With a credit |
| Bituach Leumi old-age pension | Exempt Article 21 | Exempt Even for US citizens |
Israeli withholding can exceed a treaty rate, such as the 17.5% cap on interest. Claim the excess back from Israel, since the US credits only the treaty amount.
What goes wrong most often after a move from Israel?
Keeping Israeli mutual funds and ETFs
US rules usually treat an Israeli mutual fund or ETF as a foreign corporation and a passive foreign investment company (PFIC). Each such fund generally needs its own Form 8621 every year. Holding it through the move does not spare it Israel’s tax, since the exit tax deems it sold.
Planning to cash out your Israeli pension
The savings in an Israeli pension fund generally come out only as a pension. Leaving Israel is not one of the listed exceptions. The treaty does not defer US tax on the fund’s growth. The IRS has not said how that growth is taxed. A pension fund, a kupat gemel (provident fund) or an executive insurance policy goes on Form 8938. Bituach Leumi rights do not.
A parent’s gift of shares counts as a sale in Israel
Israel can tax a parent who gives shares or fund units to a foreign-resident child as if the parent sold them. Your US basis in the gift is generally your parent’s own. An Israeli resident who sends NIS 500,000 or more abroad within 12 months must report the transfer. That can be your parent, or you before your residence ends.
Paying Bituach Leumi and US Social Security at once
The US and Israel have no totalization agreement, the kind of agreement that stops double social security tax. Social Security and Medicare tax therefore generally applies to your US pay. The main exception is a nonresident on an F-1 or J-1 visa, for work tied to the visa. Bituach Leumi can also charge contributions on that pay, because it keeps you registered as resident for up to five years after you leave. You can ask Bituach Leumi to end that sooner, but not while your spouse and children stay in Israel.
Forgetting that visa-free visits count
Days of a visa-free visit generally count toward the substantial presence test. Israel was designated for the Visa Waiver Program on September 29, 2023. The program allows visits of up to 90 days without a visa. Days on an O-1 or an E-2 count as well. The State Department has issued E-2 visas to Israelis since May 1, 2019.
Your 102 equity and Israeli savings belong on your US returns, and we put them there.
Your Israeli accountant keeps Form 1348 and the Israeli return, and we prepare every US return that follows the move.
- We prepare each US return after the move and split your 102 equity income by your workdays in each country.
- On Form 1116, we claim a credit for Israel’s tax on the Israeli part of that pay. We carry unused credit back one year or forward up to ten years.
- Your Israeli bank accounts, keren hishtalmut and funds go on the FBAR and Form 8938 where they belong. We add a Form 8621 for each fund that needs one, and Form 3520 in any year your family’s gifts top $100,000. The instant quote prices each Israeli account and fund, and any company you own over 20% of.
- We time a withdrawal from your keren hishtalmut (Israeli study fund) around your US residency starting date.
- We set your estimated payments for the year you sell Israeli shares or funds, when the deferred exit tax also falls due.
- When the IRS or a state questions a return we prepared, for example over your Bituach Leumi pension, we respond within the fee.
- Individual return
- from $195
- Business return
- from $495
We quote a flat fee before work starts. We do not bill hourly.
Which country taxes what, before and after you leave Israel?
Does Israel have a tax treaty with the USA?
Yes: the US-Israel tax treaty was signed on November 20, 1975, and has applied since January 1, 1995, after protocols in 1980 and 1993. It covers federal income tax, but it does not limit state income tax. Its saving clause lets both countries tax their own residents and citizens under their own laws, apart from listed exceptions. For someone who moves, it mainly caps Israel’s tax on Israeli income. The US credits that tax within US limits.
What taxes do US citizens pay when they work in Israel?
US citizens owe US income tax on all their income, and Israeli income tax while they are Israeli residents. The treaty’s credit rules relieve the double tax, or a qualifying citizen can exclude up to $132,900 of 2026 foreign earned income. Pay from an Israeli employer for work in Israel generally carries no US Social Security tax, and Bituach Leumi covers Israeli residents. Work for an American employer, or for yourself, can bring US Social Security and Medicare tax on top of Bituach Leumi. Under Article 21, neither country taxes US Social Security paid to a resident of Israel, even a US citizen.
Is my keren hishtalmut taxable in the US?
Probably: Israel’s six-year exemption for a keren hishtalmut, the Israeli study fund, binds Israel, not the US. The treaty’s pension article covers only periodic payments, so it does not reach a study fund. For a keren hishtalmut, US tax turns on how the account is classified, and the IRS has not said. It could count as a foreign trust, an employees’ trust or an account of PFICs, each taxed and reported its own way. Taken before your US residency starting date, a withdrawal generally escapes US tax.
How are my section 102 options taxed after I move to the US?
Israel and the US both tax section 102 options after a move, at different times. Israel includes your 102 rights in its exit tax and, by default, collects when the trustee releases or sells your shares. The US generally taxes an option’s full spread as pay at exercise, and RSU shares when they vest and are delivered. It assigns that pay to each country by your workdays between grant and vesting, and credits Israel’s tax on the Israeli part. Israel measures its share by holding period instead, so have both countries’ figures checked before you exercise.
Sources
- US-Israel income tax convention (1975), with the 1980 and 1993 protocols (IRS text)
- Treasury, technical explanation of the US-Israel convention and protocols
- Israel, Income Tax Ordinance (New Version), consolidated text (Nevo)
- Israel, Supervision of Financial Services (Provident Funds) Law, consolidated text (Nevo)
- Israel Tax Authority, deductions booklet for January 2026 (archived copy)
- Israel Tax Authority, Form 1348 for tax year 2025 (archived copy)
- National Insurance Institute, who is a resident while living abroad
- National Insurance Institute, ending residency after a move abroad
- National Insurance Institute, paying contributions while living abroad
- IRS, Instructions for Form 8802 (Rev. October 2024)
- IRS, Instructions for Form 8938
- IRS, Instructions for Form 3520 (Rev. December 2025)
- IRS, Publication 519 (2025), U.S. Tax Guide for Aliens
- 26 U.S.C. § 7701, Definitions
- 26 U.S.C. § 1297, Passive foreign investment company
- 26 C.F.R. § 1.1298-1, Section 1298(f) annual reporting for PFIC shareholders (Form 8621)
- 26 C.F.R. § 301.7701-4, Trusts
- 26 U.S.C. § 1012, Basis of property: cost
- 26 U.S.C. § 1015, Basis of property acquired by gifts and transfers in trust
- 26 U.S.C. § 83, Property transferred in connection with performance of services
- 26 C.F.R. § 1.861-4, Compensation for labor or personal services
- 26 U.S.C. § 904, Limitation on credit
- 26 C.F.R. § 1.901-2, Income, war profits, or excess profits tax paid or accrued
- 26 U.S.C. § 911, Citizens or residents of the United States living abroad
- IRS, Rev. Proc. 2025-32 (2026 inflation adjustments)
- 26 U.S.C. § 3121, Definitions (employment for FICA)
- 26 U.S.C. § 1402, Definitions (self-employment income)
- Social Security Administration, POMS RS 01701.005, totalization agreements in force
- Department of State, Foreign Affairs Manual, 9 FAM 402.9 (treaty traders and treaty investors)
- Department of Homeland Security, Visa Waiver Program
Reviewed and updated October 2026. General information, not advice for your situation.