Despite government promises that living costs would ease after the war, a new round of price increases and cuts to benefits is poised to hit Israeli households on January 1, according to senior economists. For the average family, the announced increases and the elimination of past benefits are expected to cost between 800 shekels (about $250) and 1,200 (about $375) shekels per month — equivalent to 9,600 shekels ($3,000) - 14,400 shekels ($4,500) annually, depending on family size and wage effects.
While the Finance Ministry has promoted a tax‑bracket relief for monthly earners between 16,000 shekels and 25,000 shekels, experts say this benefit is dwarfed by the ongoing freezes of income tax brackets, child benefits and tax credits — moves that effectively reduce real income. The freezes, originally promised to end in 2026 to aid middle‑class families and large households, instead continue, deepening the financial strain, analysts say.
Starting January 1, a series of price increases on basic services and products — already approved by state and local authorities — will take effect, disproportionately affecting lower‑income families and those with many dependents.
Main Cost Increases Taking Effect January 1
• Water: The Water Authority has published for public comment a 2.49% price rise for water. For an average four‑person household using 16 m³ per month, this translates to an extra about 3 shekels per month, with larger families typically seeing increases of more than 5 shekels.
• Electricity: The Electricity Authority has approved a 1.5% price hike, roughly 6 shekels per month for a representative household; in larger families, the increase may reach 10 shekels per month.
• Cooking Gas: Expected to rise by about 5% due to higher cylinder costs and indexation, with knock‑on price effects in restaurants.
• Arnona (Municipal Property Tax): While the automatic yearly increase is limited to 1.6% — down from a 17‑year high of 5.27% in 2025 — about 90 local authorities are seeking exceptional hikes, mainly for businesses but also for households. Examples include:
Ramat Gan 6.5–8.5%, Ramle 4%, Ashkelon industry 7.5%, Basmat Tivon 12%, Beit Aryeh 17%, Gilboa Regional Council 6% (commercial/services/industry), and Yeruham 4% (offices/services/commerce/industry/crafts). These increases can mean tens to sometimes hundreds of additional shekels per month in many municipalities.
• Income Tax Bracket Freeze, Tax Credits & Child Benefits: This is considered the toughest blow. Tax brackets are supposed to adjust yearly with inflation. The 2025 budget froze this adjustment, effectively cutting workers’ real wages by about 3%. Continued freezing in 2026 is expected to further erode net wages by 2.0–2.5%, costing dual‑earner households hundreds of shekels per month. Child allowances remain frozen as well: 169 shekels for the first child and 214 shekels for each subsequent child. The “Knesset Savings for Every Child” contribution is frozen again, costing roughly 3 shekels per child per month over two years.
• National Insurance (Bituach Leumi): Increased premium rates for low‑wage earners (up to 7,522 shekels) will continue, adding 48 shekels per month for employees and 72 shekels for employers.
• Cancellation of VAT Rollback: A previously hinted rollback of VAT from 18% to 17% in 2026 will not occur. For someone spending 15,000 shekels per month, this costs about 150 shekels monthly.
• Cigarettes: Prices of electronic cigarettes will rise. A 1 shekel per ml tax will apply to e‑liquid and 30 shekels per vaping device.
• Property Taxes: A 1.5% tax on non‑agricultural vacant land will be introduced, likely pushing up housing prices. A new 2% tax will apply to real estate investors selling non‑residential properties.
• Public Sector Wages: Wages in the public sector will be cut again in 2026 — this time by 1.2%, following a 2.29% cut this year, affecting hundreds of thousands of workers.