Tax and Financial Issues

Retiring in Israe

Dec. 2010

Social Security

• Tax free under the US/Israel Tax Treaty

• Need to be a resident of Israel

• Exemption begins from the month you become an oleh

Investment Income

• 10 year exemption from Israeli taxes

• Complete exemption from state tax

• US Real Estate is not exempt from state tax

Active Income

• Business income will be subject to state tax

• Salary – where were the services performed

• Retainer – could be exempt in both Israel and the US

Pensions

• First 10 years exempt

• Year 11 special tax calculation

• Will never pay more tax to Israel on US pensions/IRA’s/401k’s/Roth

• Will never pay tax to Israel or US on Roth distributions

Medicare

• Does not apply in Israel

• Should you continue Medicare B and C?

• Will you be travelling to the US periodically?

Kupat Holim

• Health insurance is included in your Bituach Leumi payments: 150 NIS a month per couple (both eligible for old-age pension)

• Age means nothing, yet:

- If you are not at a retirement age, you must pay Bituach Leumi, although you might already be paying it through your salary.

• Retirement age in Israel: Women- 64, Men- 67

Bituach Leumi

• All ages must pay, unless:

- Eligible to old age pension

- You ask to pay as a pension receiver (status). Required to pay only health insurance

• Collect from age 60:

- You have made Aliya and you are an Israeli citizen

- You have reached retirement by D.O.B.

- Women: You and your spouse aren’t receiving a pension from Bituach Leumi.

- Men: you and your spouse are not receiving a pension from Bituach Leumi or your spouse receives old-age pension or disability pension from work and is eligible to old age pension.

• Those who haven’t reached eligibility for old age pensions:

• Your work income does not exceed (or is only slightly) the maximum income in relation to size of family

• Those who have reached eligibility for old age pensions

• Your work income does not exceed (or rises only slightly) the maximum income times 3.

• Your & your spouses revenue (not from work income) does not exceed (or rises only slightly) the old age pension rate + an income supplement in relation to size of family and age.

* Maximum income: NIS as of now.

Bituach Leumi

Trusts

• Trusts can be complicated

• First 10 years exempt

• Year 11 they turn into grantor trusts for Israeli tax purposes

• May need to distribute all

• income after year 10

Currency Hedging

• US Dollar…..In G-d we trust

• Shekels

• Euros

• Sterling

• Canadian Dollar

Philip Stein & Associates Ltd.

pstein@pstein.com

admin@pstein.com

www.pstein.com

U.S. Phone: 866-995-1040

U.S. Fax: 866-611-8256