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Tax Issues When Making Aliyah

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Tax Issues When Making Aliyah. Presented by Philip Stein CPA, (USA). Israeli taxes are outrageously high Israel will take all of your money If you pay US tax; you don ’ t need to pay Israeli Income Tax Israel has a backward tax system and they will never catch you. Myth Myth Myth Myth.

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Tax Issues When Making Aliyah

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  1. Tax Issues When Making Aliyah Presented by Philip Stein CPA, (USA)

  2. Israeli taxes are outrageously high Israel will take all of your money If you pay US tax; you don’t need to pay Israeli Income Tax Israel has a backward tax system and they will never catch you Myth Myth Myth Myth Myths & Facts

  3. A 10 year vacation from Israeli Tax

  4. What does the exemption cover? • All passive income from outside of Israel • All active income from outside of Israel • No reporting requirements

  5. 10 Year Passive Income Exemption • Interest • Dividends • Rentals • Pensions • Royalties

  6. 10 Year Exemption • Applies to capital gains • Applies to earned income in the U.S. • Non real estate generally exempt from state income tax

  7. No tax on social security payments • No tax for 10 years on pensions • No more state tax on retirement income

  8. Farewell to state tax • Farewell to higher taxes • Welcome to a new beginning

  9. 15,000 Shekel a Month 20,000 Shekel a Month 30,000 Shekel a Month 35000 Shekel a Month 23% 29% 35% 36.5% Example of Israeli Salaries

  10. U.S. Taxpayer • Family of 5 • Total Income 120k • Pays NY State Tax • Has 20k in itemized deductions

  11. Effective Tax? 26.1%

  12. Hidden Taxes in the US Tuition

  13. Where do I work Where do I earn my income

  14. Where Do I Pay? • Treaty since 1995 • Prevents Double Taxation • Always pay the higher amount • Framework that both countries respect

  15. “But I don’t work for an Israeli company” • Self employed in Israel for a U.S. company • Working in Israel for a U.S. company • Where do you pay tax?

  16. Do I have to open a ‘tik’? • ‘Atzmai’ • Incorporate • Outsource

  17. What taxes do I pay in Israel? • Income Tax- ‘Mas Hachnasa’ • ‘Bituach Leumi’- 9% • ‘Mas Briut’- 5%

  18. The Problem with Self-Employment Tax • No treaty to prevent double taxation- Social Security and ‘Bituach Leumi’ • Self-Employment Tax 15.3% on approximate 1st 100k • Medicare 2.9% on income above 100k • Consider incorporating in Israel • Accounting fees are deductible

  19. What about VAT? • Rate 16% • Different than sales tax?

  20. Arnona • Real Estate Tax • Who pays?

  21. Your House- rent or sell? • No gain + no rent = no tax • Gain + no rent = up to $500,000 exclusion • Gain + Rent = new rules

  22. New Rules for sale of house • Part of gain can’t be excluded • The longer the rental period, the smaller the exclusion • Leaving the house empty, preserves the tax exemption • Must sell no more than 3 years after leaving

  23. Trust Exemption • Established and funded by long term non- Israeli resident • Israeli beneficiary is not trustee • Israeli beneficiary has no control • Israeli beneficiary cannot contribute to the trust

  24. Philip Stein & Associates Ltd. pstein@pstein.com admin@pstein.com www.pstein.com U.S. Phone: 866-995-1040 U.S. Fax: 866-611-8256

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