US-Israel Taxes for Olim (2026): FBAR, FEIE & the 10-Year Exemption Explained

Making aliyah changes almost everything about your financial life — except your obligation to the IRS. In this guide we walk through what US citizens actually owe after moving to Israel, which exclusions typically bring the US tax bill to zero, what Israel offers new olim in return, and the reporting traps that catch people off guard. Updated July 2026.

Do olim still have to pay US taxes after making aliyah?

Yes — the US taxes citizens on worldwide income no matter where they live, so every American oleh must keep filing a US tax return every year, indefinitely. Moving to Israel does not end this obligation; only giving up US citizenship does, and that’s a separate, serious decision with its own tax consequences.

This is called citizenship-based taxation, and the US is one of the only countries in the world that does it. It means your US filing requirement continues even if you never set foot in America again and even if you owe zero US tax once exclusions and credits are applied.

What is the Foreign Earned Income Exclusion, and does it erase your US tax bill?

The Foreign Earned Income Exclusion (FEIE) lets you exclude foreign wages or self-employment income from US tax up to a set amount each year, and combined with the Foreign Tax Credit, it brings many olim’s US tax bill to zero. It does not eliminate the requirement to file — you still must submit a return every year.

For 2026, the FEIE is $132,900 per person, up from $130,000 in 2025 — a married couple who both qualify can potentially exclude a combined $265,800 in foreign earned income. Because Israeli tax rates are generally higher than US rates at comparable income levels, many olim instead use the Foreign Tax Credit (FTC), claiming a dollar-for-dollar credit for Israeli tax paid — which, unlike the FEIE, doesn’t cost you certain credits like the refundable Child Tax Credit (more on that below).

Do you get Israeli tax benefits as a new oleh?

Yes — new olim generally receive a 10-year exemption on foreign-source income and gains, meaning income and assets you held or earned outside Israel before or during that window are typically exempt from Israeli tax and, for much of that period, from related reporting. This is the cornerstone benefit that makes aliyah financially workable for many Americans with US-based income or investments.

Israel has also been actively reworking olim tax rules in 2026: a Knesset Finance Committee-advanced bill would add further, separate benefits and lower brackets on Israeli-source income for those who make aliyah in this window, and a related change requires new olim to start reporting worldwide income from day one, even while it remains exempt. Important: as of this writing, parts of this reform have not been finalized into law — treat any specific numbers you see elsewhere as provisional, and confirm the current, finalized rules with an Israeli tax advisor before you plan around them.

What is FBAR, and who has to file it?

FBAR (FinCEN Form 114) is a separate filing — not part of your tax return — required if the combined balance of all your foreign financial accounts exceeded $10,000 at any point during the year. That includes Israeli checking and savings accounts, so most olim who open an Israeli bank account and receive even modest income will trigger this requirement.

FBAR is about disclosure, not tax — you’re not taxed simply for having a foreign account — but penalties for failing to file can be steep, and the threshold is easy to cross once your salary and a shekel account are involved. If you’re setting up banking in Israel for the first time, our guide to opening a bank account in Israel covers what to expect.

What about FATCA and Form 8938?

FATCA requires many US taxpayers to also file Form 8938 with their tax return, but the thresholds are meaningfully higher than FBAR’s — and higher still for Americans who actually live abroad. For olim, the year-end thresholds are generally $200,000 single or $400,000 married filing jointly, roughly double the domestic US thresholds; the “any point during the year” thresholds are higher again.

Both FBAR and Form 8938 can apply to the same accounts in the same year — they aren’t a choice between one or the other, they’re often both required, filed separately, with overlapping but not identical information.

Do you pay into both US Social Security and Israeli Bituach Leumi?

This has historically been a real risk, because the US and Israel do not have a totalization agreement — the type of bilateral treaty that normally prevents double social security taxation between countries. In February 2026, however, the Knesset passed legislation giving American olim relief from paying Israeli National Insurance contributions on income also subject to US self-employment/social security tax, for a period of several years.

This is new, unilateral Israeli legislation, not a full US-Israel totalization treaty, and the exact duration and renewal terms were still being clarified as this article was written — some sources describe an initial five-year exemption, others describe longer renewable terms. It also only covers National Insurance contributions, not the separate health tax. Given how recent this change is, confirm the current terms with a cross-border accountant before assuming you’re exempt.

What Israeli investments are risky for US taxpayers?

Israeli mutual funds, ETFs, and many pension-adjacent products like keren hishtalmut are typically classified as PFICs (Passive Foreign Investment Companies) under US tax law, which triggers punitive tax rates and interest charges plus extra annual reporting on Form 8621. This is one of the most common — and most expensive — mistakes US olim make with their Israeli savings.

The safer route most cross-border advisors recommend is sticking to US-domiciled brokerage accounts and funds for your long-term investing, even after you’re an Israeli tax resident, and treating Israeli-wrapped investment products with real caution until a cross-border CPA has reviewed them. This matters even more if you’re also weighing a property purchase — see our guide on buying property in Israel as a foreigner for how financing and ownership structures interact with your US filing.

Can olim still claim the US Child Tax Credit?

Yes — US citizen children of olim can generally still qualify for the Child Tax Credit, worth up to $2,200 per child, with up to $1,700 potentially refundable through the Additional Child Tax Credit, provided the child has a valid US Social Security Number. The catch is that claiming the FEIE typically forfeits the refundable portion, which is one more reason many olim with kids lean toward the Foreign Tax Credit instead.

If your child was born in Israel, getting them a US Social Security Number through the embassy is a prerequisite step that’s easy to delay and expensive to have missed at filing time — worth handling early rather than scrambling before a tax deadline.

Where does this leave your broader aliyah finances?

US tax compliance is an ongoing, annual obligation that should be budgeted into your move the same way housing and health insurance are — not treated as a one-time hurdle. Firms with a specific US-Israel niche, such as Philip Stein & Associates and Greenback Expat Tax, exist precisely because this overlap is common enough to need dedicated expertise. For the bigger financial picture of an aliyah move, see our cost of aliyah guide.

FAQ

Do olim still have to file US taxes after moving to Israel?

Yes, permanently — the US taxes citizens on worldwide income regardless of where they live, so annual US filing continues after aliyah unless you formally renounce citizenship. Most olim end up owing little or no actual US tax once the Foreign Earned Income Exclusion or Foreign Tax Credit is applied, but the filing requirement itself never goes away on its own.

What is the 2026 Foreign Earned Income Exclusion amount?

For the 2026 tax year, the FEIE is $132,900 per qualifying person, up from $130,000 in 2025, and a married couple who both qualify can potentially exclude up to $265,800 combined. It only applies to earned income like wages and self-employment income, not to passive income such as interest, dividends, or rental income.

Do I need to file FBAR if I have an Israeli bank account?

Yes, if the combined value of all your foreign accounts exceeded $10,000 at any point during the year — a threshold most working olim with an Israeli salary account cross easily. FBAR is a separate disclosure form, not a tax, but penalties for not filing when required can be significant.

Do US and Israel have a social security totalization agreement?

No bilateral totalization agreement exists between the two countries as of this writing, though Israel passed new legislation in February 2026 giving American olim relief from double National Insurance contributions for several years. The exact terms were still being clarified when this article was updated, so confirm current details with a cross-border advisor rather than assuming automatic exemption.

Are Israeli mutual funds and keren hishtalmut safe for US citizens?

Generally, no — most Israeli mutual funds, ETFs, and many keren hishtalmut structures are treated as PFICs under US tax law, which can mean punitive tax rates and extra annual reporting via Form 8621. Many cross-border advisors recommend US olim keep long-term investing in US-domiciled brokerage accounts instead, and have any existing Israeli fund holdings reviewed by a specialist.