Besides for Real Estate, what other options do Israelis find as tax advantaged income?

Besides for Real Estate, what other options do Israelis find as tax advantaged income?

When even at moderate income levels half of every additional shekel from your job may disappear to income tax, Bituach Leumi, and mandatory savings, it is natural to start looking for smarter and more efficient ways to grow money.

Below are several alternatives that many Israeli investors explore.

1. Private Lending (Hard Money or Peer Loans)

Many Israelis now lend money to small businesses or developers at interest rates ranging from 8 to 15 percent per year.

If the lending is occasional and documented as a passive investment, it is generally taxed at only 15 to 25 percent, with no Bituach Leumi.

However, if it becomes frequent or systematic, the Tax Authority may classify it as a business, which can lead to full income taxation.

While it can be efficient when done carefully, it also carries real risk of borrower default.

Halachic note: When lending to or through Jewish borrowers, a valid heter iska must be in place for the transaction to comply with halachah.

2. U.S. Real Estate Syndications

A large percentage of of Israelis invest in partnerships that own U.S. apartment complexes or commercial properties.

Depreciation in the United States shelters much of the income, and Israeli residents generally pay no Bituach Leumi on this type of income.

After applying a foreign tax credit for U.S. taxes, the total effective rate often ends up around 20 to 25 percent, which is far below the typical Israeli salary rate.

This approach has grown popular because it combines dollar-denominated income with global diversification and is typically completely passive.

Unlike owning your own rental apartment, there are no tenants to manage, no repairs to arrange, and no direct involvement required once the investment is made.

3. Capital Market Investments

Dividends and capital gains on publicly traded stocks or mutual funds are taxed at 25 to 30 percent, with no Bituach Leumi.

This is roughly half the rate of high-level salary income.

Keren Hishtalmut plans improve this further, since all growth inside the fund is completely tax-free after six years.

For that reason, many professionals maximize their annual contributions to these accounts.

4. Combining Assets for Balance

More experienced investors often combine real estate, private lending, and capital market investments to balance risk and generate consistent cash flow.

Each income type is taxed differently, but all are considerably more efficient than salary income once a person enters higher tax brackets.

In Israel, once you understand how heavily salary income is taxed, it becomes clear why so many people diversify.

Real estate may be the first step, but private lending, overseas syndications, and long-term investment vehicles have become essential parts of the basic modern Israeli financial survival strategy.