Property Tax Reform Could Deliver Bigger Discounts to 100,000 More Israeli Households
A sweeping reform proposed by Israel’s Interior Ministry could make roughly 100,000 additional households eligible for municipal property tax (arnona) discounts beginning in 2026, while significantly increasing the value of existing benefits. The changes, however, are expected to reduce local government revenues by approximately NIS 1.1 billion.
According to a report in Maariv, an analysis by the Finance Ministry’s Chief Economist projects that the number of households qualifying for income-based arnona discounts will rise from approximately 740,000 to 840,000. At the same time, the total value of those discounts is expected to grow from about NIS 2.2 billion to roughly NIS 3.2 billion.
The reform would overhaul both the method used to calculate household income and the scale of discounts available. According to the Finance Ministry, the current system disproportionately favors larger households, while the proposed model broadens eligibility across additional segments of the population. Officials estimate that about 91 percent of households already receiving discounts will qualify for larger reductions, while only a small percentage are expected to receive less than they do today.
The expanded benefits are expected to come at a significant cost to local authorities. The Finance Ministry estimates municipalities collectively will lose approximately NIS 1.1 billion in revenue, with financially weaker communities bearing the greatest burden. In municipalities ranked in the lowest socioeconomic category, the reduction could amount to as much as 7 percent of their discretionary budgets—the portion of municipal funding available for local services.
The reform is also expected to extend benefits well beyond the lowest-income households. Eligibility among families in the second and third income deciles is projected to increase from 51 percent to 64 percent, while more modest gains are anticipated for households in the fourth through sixth income deciles. One reason for the broader eligibility is that the revised income calculation excludes several National Insurance benefits, including child allowances, old-age pensions, survivor benefits, and disability payments for children.
According to the analysis, chareidi households are expected to have the highest eligibility rate under the new formula. Under the current system, approximately 60 percent of chareidi households qualify for an arnona discount; under the proposed rules, that figure is expected to rise to 65 percent. The average annual discount for a chareidi household is projected to be approximately NIS 4,600. The Arab sector is expected to experience the largest increase in eligibility, with the percentage of qualifying households climbing to approximately 53 percent.
The proposal does not alter existing employment incentives. Eligibility for the discounts will continue to be based solely on financial criteria and will not require recipients to enter the workforce or maximize their earning capacity. Likewise, applicants will still be required to submit documentation manually rather than having eligibility verified automatically through direct data-sharing with Israel’s National Insurance Institute. According to the Finance Ministry, only about 40 percent of eligible households currently take advantage of the benefit.
{Matzav.com}
