Shekel Guide

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Israel's 2027 Budget: What the Deadlock Means for Your Taxes

After the October 27 election, no 2027 budget is expected to pass before a new vote. What it means for your payslip on January 1, and what the Finance Ministry is preparing.

By the Shekel Guide editorial teamOfficial sources listed below

The short version. The bloc that came first in the October 27 election falls short of the 61 seats needed to govern. According to Fitch, quoted by the Jerusalem Post on November 1, the most likely path is a Knesset dissolution in early January and new elections in early April. Passing a 2027 budget before then is seen as “completely unlikely”.

January 1: a continuation budget

Without an approved budget, the state runs on a continuation budget. Monthly spending is capped at one twelfth of the previous year’s ceiling, and nothing new can be funded. On the tax side, there is no budget law, so no new brackets and no new reductions are voted.

For employees, the 2026 schedule from Amendment 288 remains the reference: wider 20% (up to ₪19,000 a month) and 31% (up to ₪25,100) brackets. The only changes possible on January 1 are the usual administrative updates (credit point value, contribution ceilings), published by the Tax Authority and Bituach Leumi. We will build them into the calculator as soon as they are published.

What the Finance Ministry is preparing

An internal ministry committee is working on a tax overhaul to present to the next government (Calcalist, October 12). These are options, not decisions:

  • widening the 31% bracket further;
  • reducing child credit points, with no figures yet;
  • limiting the keren hishtalmut capital gains exemption to the first six years of a fund;
  • ending VAT exemptions: imported digital services, tourism, fruit and vegetables, Eilat;
  • a tax on vacant land.

A Treasury document from May also floated reviewing olim tax benefits and raising the retirement age, again at the proposal stage.

All of this needs the Knesset: nothing can apply before a government is formed and a budget passed, so not before spring 2027 at the earliest.

What you can do now

  • Check your December payslip: it is the last month for your employer to correct 2026.
  • If you were counting on child points for 2027, nothing changes on January 1: any cut could only come with an approved budget.
  • Olim: your current rights (ten-year exemption, olim points) are those of the law in force. We will track any change.

Our updated guides

Sources

  1. Jerusalem Post, Fitch on the political deadlock (Nov 1, 2026)
  2. Calcalist, the tax overhaul being prepared at the Finance Ministry (Oct 12, 2026)
  3. Ynet, the Treasury's 2027–2032 multi-year plan (May 13, 2026)

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