Israeli Law Q&A for United States Residents

No. The United States and Israel have no social security totalization agreement, which has a real cost for self-employed Americans in Israel. A self-employed US citizen working in Israel can owe both US self-employment tax at 15.3% and Israeli National Insurance and health contributions on the same earnings, with no mechanism to avoid the double charge. There is a US-Israel income tax treaty, but it does not cover social security, and the foreign earned income exclusion does not reduce US self-employment tax.

Often yes, and it is a genuine extra cost. The 3.8% Net Investment Income Tax applies to US citizens above income thresholds on investment income wherever it arises, including Israeli rent, interest, dividends, and gains. The trap is that the foreign tax credit does not offset the NIIT, so Israeli tax paid on the same income does not cancel it. The result can be Israeli tax plus a residual 3.8% US charge with no relief, unlike regular US income tax, which the foreign tax credit does reduce.

Very likely, if US shareholders control it. An Israeli company owned mostly by US persons is a Controlled Foreign Corporation for US tax, and its US shareholders owe US tax annually on their share of its GILTI (global intangible low-taxed income) under IRC Section 951A, even if no dividend is paid. Israel taxes the company at 23% corporate tax, and that Israeli tax can reduce, though not always eliminate, the US charge. The trap is that GILTI is taxed as it is earned, so retaining profits in the Israeli company does not defer the US bill.

In Israel, short-term rental income is treated as business income, not passive residential rent, so it does not qualify for the flat 10 percent track or the residential-rent exemption. It is taxed at marginal rates up to 47 percent, can attract National Insurance, and triggers VAT registration once turnover passes NIS 120,000. As a US owner you also report the income to the IRS on your return, but you claim a foreign tax credit for the Israeli tax so the same income is not fully taxed twice.

Yes. The Companies Law 1999 lets a foreign entity, including a US LLC, hold shares in an Israeli company, and corporate shareholders are common. The complication is tax, not corporate law: the US treats a single-member LLC as a pass-through, while Israel treats it as an opaque foreign company, and that mismatch can break treaty relief and cause double taxation on dividends. The LLC's ownership and its ultimate beneficial owner must also be disclosed to the Registrar of Companies.

Usually no. Since Amendment 76 to the Real Estate Taxation Law 1963, a non-resident can only use the single residential apartment exemption if they prove they own no other home in their country of residence. A US seller who owns a house in America therefore fails the test and pays Israeli capital gains tax (mas shevach) on the Israeli apartment, though linear apportionment and a US foreign tax credit soften the result. The Israel Tax Authority requires documentary proof of no home abroad before granting the exemption.

Usually reporting rather than actual tax. As a US citizen you are taxed on worldwide gifts, so transferring your Israeli apartment is a reportable gift on IRS Form 709 if it exceeds the annual exclusion of about USD 19,000 per recipient, though it normally just draws down your large lifetime exemption instead of creating a cash tax. On the Israeli side there is no gift tax, but purchase tax still applies at one-third of the normal rate on a transfer to a relative, and appreciation tax may be exempt under Section 62 of the Real Estate Taxation Law 1963.

You order an FBI Identity History Summary, then have it apostilled by the US Department of State in Washington DC, not by a state Secretary of State, because it is a federal document. Israel requires the clearance because a criminal past can bar aliyah under Section 2(b)(3) of the Law of Return 1950, and the Jewish Agency and Israeli consulates want it recent, usually within three to six months. After the apostille you add a certified Hebrew translation before submitting it.

Yes, for aliyah. A convert through a recognized Reform or Conservative community qualifies as a Jew under Section 4B of the Law of Return 1950, and the Jewish Agency and Ministry of Interior process such applicants for citizenship. A March 2021 Supreme Court ruling extended this to non-Orthodox conversions performed inside Israel. The Chief Rabbinate still refuses to recognize these conversions for marriage and religious status, which is a separate matter from immigration.

No, you do not apostille the passport itself. A passport is government identification, and no US Secretary of State will apostille it directly. What an Israeli bank or lawyer needs is a certified true copy: a US notary certifies the copy, and the apostille then attaches to the notary's certificate. An Israeli consulate or an Israeli lawyer can certify the copy instead, which removes the apostille step entirely.

It can, but only if the Israeli property was genuinely your principal residence for at least two of the five years before the sale, in which case IRC Section 121 lets a US person exclude up to $250,000 of gain, or $500,000 for a married couple filing jointly. Most non-residents' Israeli apartments are second homes or rentals, which do not qualify. On the Israeli side the sale is taxed as land appreciation tax (mas shevach) by the Israel Tax Authority, and the two systems are reconciled through the foreign tax credit rather than by one exemption covering both.

Generally yes, if the care would be a qualified medical expense under IRC Section 213, you can use HSA or FSA funds for treatment received in Israel, because there is no rule limiting qualified care to inside the US. In practice you pay the Israeli provider out of pocket, since hospitals here bill non-residents privately under the National Health Insurance Law 1994, then reimburse yourself from the account against an itemized tax invoice (heshbonit mas). Keep receipts, because the IRS, not the Israeli hospital, decides whether the expense qualified.