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Self employed American citizens living in ISRAEL


The most significant taxation difference between Self emplyed and employees in Israel lies inSocial Security obligatory payments and Medicare as designated in the Tax Return.

The U.S.-Israel Tax Treaty is aimed at preventing double taxation, however there is no treaty preventing the double payment of Social Security payments, therefore:

A U.S. citizen who is self-employed working in Israel, earning more than $400 annually (after expenses), is obligated by law to pay Social Security, referred to in the tax returns as Self-Employment Tax , using the Self-Employment Tax SE-form.

Tax Structure:

a.12.4% of net profit (after expenses) for Social security payments

b.2.9% of net profit for Medicare

There are two significant advantages in these  payments vs. one disadvantage


U.S. law states that any citizen completing 40 quarterly of Social Security payments (= 10 years) will be entitled to Social security benefits.

U.S. law states that legally paying U.S. citizens will also be entitled to disability payments under certain conditions afforded by the SSA.

These advantages are twofold:

1. As there is not treaty between the U.S. and Israel on Social Security the payer will be entitled to Social Security payments from both countries.

2. In most cases U.S. Social Security are significantly higher than those paid in Israel.

For Example: in 2012 the average Social Security payments paid per month toU.S. employees retired at the age of 62 was $1230U.S. employees retired at the age of 66received a higher amount of $2513. In Israel the basic monthly stipend for the elderly in 2011 was 1,502 NIS



Your payments must happen in real time, while the benefits of these payments can only be collected at a later point in life. We recommend getting in touch with a Virtue Tax Group Representative who can assist you in finding the best and most appropriate option for your specific needs.

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