American-Israeli Social Security Taxation
- Aharon Goldwater
- Mar 2
- 2 min read
Updated: Mar 25
Double Take no More
Attention US citizens, this is important. British people - pay no heed.
Some problems in life seem so easily solvable and yet in reality manage to stick with us. None more so than double taxation of Bituach Leumi (בִּיטוּחַ לְאֻמִּי - Israeli Social Security) and US Social Security tax. For years this has not been included in the double tax treaty between Israel and the USA.
The problem applies to:
Any US citizen working in Israel not on a Tlush (תְּלוּשׁ - pay slip aka employed workers).
Anyone set up as an Atzmai (עַצְמָאִי - self-employed/independent) either because they work in private practice, they work independently for an HMO or Hospital or they work for a US company, either as a W2 employee or 1099 contractor.
The problem:
Up until now, you had to pay both Bituach Leumi (בִּיטוּחַ לְאֻמִּי - Israeli Social Security) and Mas Briut (מַס בְּרִיאוּת – Health Tax) in Israel as well as Social Security and Medicare Tax in the US.
This created a crazy high tax burden for US Olim.
(A previous blog discussed how this can be addressed)
New & Exciting News:
Last week a new law was passed saying that for the first five years after Aliyah you don’t have to pay Bituach Leumi (בִּיטוּחַ לְאֻמִּי - Israeli Social Security) for income you are already paying a Social Security Tax for in a different country, namely the US.
Problems that still exist:
After five years, you lose this benefit and return to paying social security in both countries.
This new law does not affect Health tax. You are still obligated to pay up to 5.17% Mas Briut (מַס בְּרִיאוּת - Health Tax) in Israel, in addition to US Social Security + Medicare.
Potential work arounds:
Many potential ways to deal with this have been suggested, none of which are perfect. They include using employer of record companies, setting up an S-corp, setting up an Israel Company or reneging US citizenship.
It is always worth a discussion with a professional CPA to see what your options are.
Aharon Goldwater ACCA
053-5250747
