As 2024 draws to a close in just over a month, households have opportunities to take financial actions that can add significant value for the current fiscal year.
Step one: Review Pension and Study Fund Contributions.
Examine whether there are any income sources for which no contributions have been made for pension funds or study funds (Keren Hishtalmut). Both self-employed individuals and employees can make non-employer deposits into pension plans and enjoy tax benefits. These tax benefits effectively reduce the worker's tax liability. Self-employed individuals can also contribute to study funds for additional tax advantages.
Salaried employees can secure additional tax benefits beyond their regular salary arrangements in cases where:
- Employer contributions don't cover all salary components
- Contribution amounts haven't reached the legal ceiling (Note: Tax benefits only apply to employees whose salary level requires income tax withholding. To qualify for these tax benefits, deposits must be made by the end of December 2024).
Investment Options For households with available funds, consider opening an Investment Provident Fund (Kupat Gemel LeHashkaa). This financial instrument allows for flexible, independent savings with personalized time horizons. While these funds remain liquid, withdrawals are subject to capital gains tax on profits. However, if withdrawn as an annuity after age 60, both the profits and the annuity will be tax-exempt.
Additional Opportunities:
- Salaried employees can request their employer to increase pension contributions from 6% to 7% of their salary, resulting in enhanced tax benefits.
- Workers can make additional monthly independent deposits to their chosen pension instrument, increasing both tax benefits and savings.
Time is of the essence – let's prepare and take necessary actions, seeking professional guidance when needed to ensure we don't miss these opportunities.
