Economic Efficiency Law (Legislative Amendments to Achieve Budget Targets for Budget Year 2025) (Freezing Tax Updates and Surtax), 5785-2024

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The law freezes the update of amounts in income tax and real estate taxation for 2025 to 2027. The meaning is that income ceilings, credit points, allowances, purchase tax brackets and the exemption from capital gains tax will remain as they were in 2024 and will not be updated according to the Consumer Price Index. This freeze does not apply to the work grant (negative income tax). In addition, a new surtax of 2% is imposed on income from capital sources (such as capital gains, interest, dividends) exceeding 721,560 shekels a year (the amount as it was in 2024). This tax will apply in addition to regular income tax. Regarding the sale of a residential apartment, the additional tax will be imposed only if the sale value exceeds 5,382,285 shekels (as of 2024) and the sale is not tax-exempt. The Minister of Finance will set in regulations the manner of calculating the additional tax in these cases. The law also provides that the update of amounts in the work grant (negative income tax) will be frozen for 2025 and 2026, and will be updated only from 2028, according to the index change known on January 1, 2027.