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Benefit for the Self-Contribution to Your Study Fund Keren Hishtalmut

Benefit for the Self-Contribution to Your Study Fund Keren Hishtalmut

Self-employed business owners, don’t miss this tax benefit for the self-contribution to your study fund (Keren Hishtalmut).

** The information and advice in this notice are for general discussion purposes only. The provisions of the law on these subjects are more complex than those detailed in this article. For more information regarding your personal situation, you should contact us for an individual consultation. **


Dear Clients and Friends,

As we are now approaching the end of 2023, it’s a good opportunity to remind our self-employed clients to take advantage of the special tax benefits that there are by contributing to their study fund (Keren Hishtalmut). You should take advantage of these benefits that you are entitled to.

From a tax perspective, we believe that this is the best type of investment. With proper planning, contributing to a Keren Hishtalmut will entitle the self-employed to tax benefits both as a current year deduction and tax-exempt earnings on savings for interim periods up to 6 years.

The benefits of contributing to your study fund

Contributions to a study fund gives the self-employed person two important tax benefits:

  • A deduction for tax purposes at the time of the deposit.
  • An exemption from capital gains tax on withdrawals from the fund provided that the withdrawal is made after 6 years from the day of the account opening.

The tax deduction benefit

Deposits to a study fund are considered a “deduction” for tax purposes, that is it reduces the taxable income similar to recognized expenses in a business. This deduction is limited to 4.5% of your annual taxable income or 283,905 NIS, whichever is less.

Therefore, the maximum annual contribution that can be taken as a deduction is:
283,905 * 4.5% = 12,775 NIS.

For contributions of 11,925 NIS the benefit is approximately 4,471 NIS for the year.

What is a “qualified contribution” for the capital gains tax exemption?

A self-employed person with a qualified business certificate from the VAT office may contribute up to 19,920 NIS during the year to a self-employed study fund and benefit from having an exemption of capital gains tax on the day of withdrawal, provided that the withdrawal is made after 6 years from the day of opening the account.

Please note that this benefit does not depend on your level of annual income. Therefore, even a self-employed person with low annual income may still deposit the entire calculated amount (19,920) and fully take advantage of the benefit.

Terms and conditions for utilizing this benefit:

Only a self-employed person who is earning income from a business is eligible to open a study fund and enjoy the tax benefits mentioned above. By presenting your qualified business certificate you will be able to create your study fund account.

Employees are not allowed to make independent contributions to their study fund but they still receive the tax benefits for contributions made for them by their employer.

In order to take advantage of this benefit, you should contact one of the Israeli insurance/pension funds and present to them your qualified business certificate (osek mursheh or osek patur), open an account and quickly make a deposit to the account by the end of this tax year.

In our opinion from a tax perspective, one of the best methods of saving money is through a study fund.

With proper tax and financial planning, you can generate savings without having to pay taxes on the gains. For more information about the tax benefits regarding contributions to provident funds please see our article here.

For questions and more information, please contact Orel Peretz at our office at [email protected] or call 02-9992104 extension 656.

* Note: Upon withdrawal of the study fund, U.S. citizens must report accumulated earnings to the IRS and may be liable to pay tax to the US even though the withdrawal is tax exempt in Israel. For advice on how to minimize your U.S. tax burden, please contact us at our office for individual consultation. *

** The information in this article refers to rates for year 2023. **

Very truly yours,

Deutsch & Company

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