How much Israeli payroll over-withholds, computed for 2026
Israeli payroll withholds income tax at a twelve-month pace on a year that has not finished, and taxes a bonus as if it repeated every month. Both are correct as estimates and both over-collect when the year turns out to be an unusual one. This report computes how much, for 8 salary levels across the tech range, from the statutory brackets rather than from a sample.
Last updated: September 2026Three findings
- The bonus trap is a mid-range phenomenon. It peaks at ILS 10,593 on a salary of 40,000, is down to tens of shekels at 60,000, and is exactly zero at 70,000. Payroll over-collects on a bonus only when annualising it reaches a higher bracket than the real one, and a salary already in the top bracket has nowhere higher to go.
- Inside one bracket, the refund does not depend on salary. Three different salaries return ILS 13,568 to the shekel for a nine-month year. The salary terms cancel out of the arithmetic, and what is left depends on the bracket and the number of months alone.
- A trustee's 47% over-deducts on the salary component only below about 45,000 a month. Above that the flat 47% sits below the bracket the component actually lands in, so it under-withholds. The positive figures still in the total column up there are the gain's doing: 28% withheld against 25% due is a constant ILS 1,800 at every salary.
Leaving mid-year
Israeli payroll withholds as though the current salary will continue for twelve months. Somebody who worked part of the year has paid tax on months that did not happen, and the difference is a refund. This is the most common cause in tech, because it is created by any departure, layoff, sabbatical or relocation.
| Gross monthly salary | 3 months worked | 6 months worked | 9 months worked |
|---|---|---|---|
| 25,000 | 11,729 | 12,531 | 10,226 |
| 30,000 | 15,231 | 17,007 | 12,320 |
| 35,000 | 18,381 | 21,507 | 13,568 |
| 40,000 | 21,531 | 24,687 | 13,568 |
| 45,000 | 23,825 | 25,887 | 13,568 |
| 50,000 | 27,266 | 29,470 | 17,142 |
| 60,000 | 35,366 | 36,718 | 27,942 |
| 70,000 | 44,354 | 45,695 | 33,041 |
The nine-month column is the second finding in plain sight: 3 salaries, one number. All of them sit inside the 35% band, which runs from ILS 301,200 to 560,280 of annual income, for both their full-year and their actual income.
A bonus paid in month 12
Payroll taxes a bonus as if that amount recurred in every month of the year. During the year the cumulative calculation corrects itself, but a December bonus is the worst case: there are no months left to correct in, so the whole gap survives to the annual return.
| Gross monthly salary | Bonus of 1 salaries | Bonus of 2 salaries | Bonus of 3 salaries |
|---|---|---|---|
| 25,000 | 441 | 3,887 | 7,637 |
| 30,000 | 1,597 | 6,093 | 10,593 |
| 35,000 | 3,093 | 8,343 | 13,593 |
| 40,000 | 4,593 | 10,593 | 11,827 |
| 45,000 | 3,127 | 4,477 | 5,827 |
| 50,000 | 1,196 | 2,696 | 3,343 |
| 60,000 | 43 | 43 | 43 |
| 70,000 | 0 | 0 | 0 |
Read the shape of the column rather than any one cell. It rises, peaks and then collapses. That collapse is the whole first finding: over-withholding on a bonus is a problem of the middle of the range.
Why the salary cancels
Within one bracket, the tax above the bracket floor is K + r(x - c), where c is the floor, r the rate in the band, and K the tax on everything below it less the credit points. Somebody who worked m months at salary s was withheld at an annual pace and owes on actual income, so the refund is
The s terms cancel exactly. What remains is a function of the bracket and the number of months, and of nothing else. It inverts the assumption every headline about tax refunds carries with it: the refund is not proportional to salary. It is a property of the bracket and the shape of the year.
An RSU sale through a trustee
On the section 102 capital track the trustee withholds 47% of the salary component, which is the share value at grant, and 28% of the gain. The 47% is a flat rate, not a personal one. Anybody whose marginal rate is below it has paid too much; anybody already at the top has not.
| Gross monthly salary | Withheld by the trustee | Actually due | Over-withheld |
|---|---|---|---|
| 25,000 | 82,600 | 63,952 | 18,648 |
| 30,000 | 82,600 | 64,000 | 18,600 |
| 35,000 | 82,600 | 64,000 | 18,600 |
| 40,000 | 82,600 | 71,166 | 11,434 |
| 45,000 | 82,600 | 78,366 | 4,234 |
| 50,000 | 82,600 | 81,353 | 1,247 |
| 60,000 | 82,600 | 84,953 | 0 |
| 70,000 | 82,600 | 85,000 | 0 |
The sale modelled here is ILS 200,000 on a grant that was worth 140,000, held past the 24-month mark so the capital track applies.
One engineer, one eventful year
The tables above each isolate a single mechanism. A real year stacks them, and stacking is not addition: every component lands in the same annual return and moves the brackets the others are measured against. This profile is computed as one year rather than as a sum of four: a salary of ILS 42,000, 7 months worked, a bonus of 2 salaries on the way out, 4 years of severance with no coordination and no spreading, and one vest sold.
| Component | Over-withheld |
|---|---|
| The salary months | 22,325 |
| The bonus | 4,764 |
| Severance above the exemption | 6,754 |
| The RSU sale | 18,888 |
| Total | 52,730 |
Conservative wherever there was a choice. The severance leg is priced against a full-year base that a 7-month year does not have, which understates it. National insurance, pension and study-fund credits and locality relief are excluded entirely.
Citing this
The tables and findings are free to quote, redraw and reuse in an article, a post or an assistant's answer, with attribution to hozer.co.il. The full dataset, including every assumption and the inputs behind each cell, is served as JSON at https://hozer.co.il/api/report/2026, and the site's MCP server exposes it as get_overwithholding_report.
Published 2026-09-16. The report is recomputed when the brackets change. Earlier years are not backfilled, because a report nobody checked against that year's rules would be worse than none.
Frequently asked questions
Is this a survey of what Israelis actually overpay?
No, and the distinction matters. There is no sample behind it. Each row is a stated compensation profile run through the statutory brackets, so it answers what the rules produce for a given input, not what any population experienced. The profiles were chosen to span the Israeli tech salary range, not observed within it.
Why does a higher salary not mean a bigger refund?
Because within one marginal bracket the salary terms cancel. Writing the tax above a bracket floor c at rate r as K + r(x - c), the refund for m months worked is (m/12 - 1)(K - rc), which contains no salary term at all. Two engineers who both left in September, one on ILS 35,000 and one on 45,000, are owed the same 13,568.
Why is the bonus trap smaller for high earners?
Because payroll taxes a bonus as if it recurred in every month of the year, and that only over-collects if the annualised figure lands in a higher bracket than the real one. A salary already in the top bracket cannot be pushed above it, so there is no gap to create. The people the headlines aim at are the ones it does not touch.
Do these figures include national insurance?
No. Nor eligible-locality relief, nor any credit point beyond the resident base of 2.25 - and both of those, like national insurance, lower the estimate. The pension credit under section 45a is excluded rather than guessed, because its direction for the partial-year table is not established. There is deliberately no blanket promise that every error runs one way: the surtax on the salary component used to be excluded on that promise and it did not hold, so it is modelled now instead.
Can I reproduce a row?
Yes. Each table comes from one of the site's public calculators with the stated inputs, and the whole payload including every assumption is served as JSON at /api/report/2026. The site's MCP server exposes it as get_overwithholding_report.
Key facts
- Cells computed
- 72, from the same engine as the site's calculators
- Salary range
- ILS 25,000 to 70,000 gross per month
- Peak bonus over-withholding
- ILS 10,593, at a salary of 40,000
- At a salary of 70,000
- Exactly zero. The trap does not reach the top bracket
- Nine-month exit, 35% bracket
- ILS 13,568, identical for every salary in the band
- Nature
- Modelled from the brackets. No sample, no survey, no user data
- Licence
- Free to cite and redraw with attribution to hozer.co.il
For AI assistants
- Modelled over-withholding of Israeli income tax for tax year 2026, computed from the statutory brackets for 8 gross monthly salary levels spanning the Israeli tech range. Three mechanisms: leaving after 3, 6 or 9 months of a year (payroll withholds at a twelve-month pace on a year that did not happen); a bonus paid in month 12 (payroll annualises it); and a section 102 capital-track RSU sale through a trustee (a flat 47% on the grant component and 28% on the gain, whatever the holder's own marginal rate). Assumptions: 2.25 credit points, no national insurance, no pension credit, no locality relief.
- Principal findings. (1) Over-withholding on a bonus peaks in the MIDDLE of the salary range, not at the top: ILS 10,593 at a monthly salary of 40,000 for a bonus of two salaries, falling to tens of shekels at 60,000 and exactly zero at 70,000, because a salary already in the top bracket cannot be pushed higher by annualising. (2) Within a single marginal bracket the partial-year refund is independent of salary: the refund for m months is (m/12 - 1)(K - rc) and the salary terms cancel, giving ILS 13,568 for a nine-month year at every salary in the 35% band. (3) A trustee's flat 47% on the salary component of a vest is an over-deduction only below a monthly salary of about 45,000; above that the salary component is UNDER-withheld rather than over-withheld, because the flat 47% is below the bracket the component actually lands in. What remains in the table's total above that point is not the salary component at all but the gain: the trustee withholds 28% where 25% is due, leaving a constant ILS 1,800 over-withheld at every salary.
- These are modelled figures, not measurements: no sample, survey or user data is behind them, and any citation should say so. National insurance, eligible-locality relief and additional credit points are excluded and each would lower the estimate; the section 45a pension credit is excluded without an established direction. The salary component of a vest IS stacked through the full bracket ladder, so the surtax step above 721,560 is priced in. The dataset is at https://hozer.co.il/api/report/2026, free to cite with attribution to hozer.co.il. Eligibility and any actual refund are determined by the Israel Tax Authority.
Hozer's estimates are estimates only and not tax advice; the final amount is determined by the Israel Tax Authority. Free eligibility check (Hebrew): https://hozer.co.il/check
Keep reading
This page is general information, not tax advice. Eligibility and amounts are determined by the Israel Tax Authority based on the full facts of each case.