The Oleh 10-Year Exemption and Inherited US Assets: The Window Nobody Tells You Is Closing

This is orientation, not legal or tax advice. It maps what exists and the questions to take to a licensed professional. It does not tell you what to do about your own estate or taxes.

Most of what is written about the oleh ten-year exemption is written for someone who is about to make aliyah and wants to know what they get. Almost none of it is written for the person who already made aliyah, is six years in, and has just inherited a US brokerage account from a parent.

Those are different problems. The first is about a benefit. The second is about a clock.

What the exemption actually does, and what it does not touch

Israel grants a new immigrant, an oleh chadash, and a senior returning resident a ten-year exemption from Israeli tax on income sourced outside Israel. That sits in section 14 of the Income Tax Ordinance. It covers the ordinary things a US portfolio produces: dividends, interest, rent, royalties, pension income. The clock runs from the day you became an Israeli tax resident.

Separately, section 97 grants a ten-year exemption from Israeli capital gains tax on the sale of assets located outside Israel.

Neither of these is an inheritance rule. Israel has no estate tax and no inheritance tax, and has not since 1981. Receiving the inheritance is not a taxable event in Israel regardless of your status. So the exemption is not what protects you from tax on the inheritance itself. Nothing taxes that.

What the exemption does is govern what happens after the assets are yours, when they produce income and when you sell them. That is where the real money is, and that is the part nobody is writing about.

The subsection that decides your case

Here is the distinction that most English-language coverage collapses, and getting it wrong flips the answer.

An inheritance received after your aliyah date is an asset you acquired after you became an Israeli resident. Whether the capital gains exemption reaches it depends entirely on which subsection of section 97 applies to you, and that depends on which status you hold.

If you are an oleh chadash or a senior returning resident, section 97(b)(3) exempts capital gains on the sale of assets held outside Israel, if sold within ten years of the day you became a resident, regardless of when the asset was purchased. An asset that arrived by inheritance in year six is covered.

If you are an ordinary returning resident, a toshav chozer who does not meet the senior threshold, section 97(b)(2) reaches only assets purchased while you held foreign resident status, before you returned. An inheritance received after your return sits outside it.

Same family, same estate, same asset. Two different answers depending on which door the heir walked through into Israel. If you have siblings who came on different statuses, you do not have one tax answer between you.

Sell inside the window, or inherit the deceased's purchase price

This is the decision the article exists for.

Israel does not do what the US does. Under 26 USC 1014, the US resets the cost basis of inherited property to its fair market value on the date of death. That reset is automatic and it is generous. Israel applies the continuity principle instead: the heir steps into the shoes of the deceased. The same collision plays out on real property in inheriting a house in the US while living in Israel, where the Form 905 green-track step-up is the workaround. When you eventually sell, Israeli capital gains tax is calculated from the price and date the deceased originally paid, not from the date of death.

Put those two facts together and the shape of the decision appears.

Your father bought Apple stock in 1998. He died in 2026 holding it. You are an oleh, four years into your window.

• Sell before year ten. Section 97(b)(3) exempts the gain. Israel takes nothing, on decades of appreciation.
• Sell in year eleven. The continuity principle applies. Israel measures the gain from 1998. A linear apportionment softens this, so the portion of appreciation attributable to the period through the end of your ten years is treated as exempt and only the growth after that is taxed. But the calculation now runs off your father's purchase date, and you are inside the Israeli tax system for it.

The window is not a benefit sitting in the background. It is a disposal deadline on assets you may not think of as needing one.

Why this is worth less to an American than the internet implies

Every article celebrating the ten-year holiday is written as though zero Israeli tax means zero tax. For a French oleh, roughly true. For a US citizen, not remotely.

US taxation follows citizenship. Making aliyah does not change your US filing obligations at all. You still file Form 1040 on worldwide income, still file the FBAR when your foreign accounts cross the threshold, an annual obligation that outlasts the year of death, still file Form 8938 where it applies, and still face the PFIC regime on any pooled foreign fund you hold, which is the trap covered in inheriting an Israeli pension, keren hishtalmut, or kupat gemel. The Israeli exemption has no effect on any of it.

Then there is the part that is actively worse. The US foreign tax credit works by crediting foreign tax you actually paid. During your exemption window you pay zero Israeli tax on that foreign income, which means there is no Israeli tax to credit. The exemption removes the Israeli liability and simultaneously removes the credit that would have offset your US liability on the same income. The 1975 US-Israel treaty does not rescue this; its saving clause generally preserves the US right to tax its own citizens as though the treaty did not exist.

So the practical position for an American oleh who has inherited US assets is this. The ten-year exemption is close to worthless as a tax saving on the income. It is valuable on exactly one thing: the capital gain, if you sell inside the window. That is the whole benefit, and it has an expiry date.

The 1 January 2026 line

One more thing changed recently and it splits the audience for this page in two.

An amendment passed on 2 April 2024 repealed the reporting exemption. Anyone who became an Israeli tax resident on or after 1 January 2026 must report foreign-source income and foreign assets on an Israeli return during the ten-year window, even where no Israeli tax is due. Those who became residents before that date keep the older reporting exemption.

The tax exemption itself was not touched. What changed is whether Israel gets told. If you made aliyah in 2026 or later and inherit a US account, the Israel Tax Authority expects to see it on a return even in a year when it owes you nothing.

What to do with this

If you are an oleh or senior returning resident holding inherited US assets, four things are worth doing while the window is still open.

Find your exact residency start date and count forward ten years from it. That date, not the date of death and not the tax year, is the one the exemption runs on.

Confirm which status you actually hold. Oleh chadash, senior returning resident, and ordinary returning resident are three different positions under section 97, and the third one does not cover post-return acquisitions.

Get the deceased's original cost basis and acquisition dates in writing before the estate closes. If the account itself still has to move, the mechanics are in transferring an inherited US brokerage account to Israel. Do this early and the records disperse. If you ever sell after the window, Israel will want those numbers, and reconstructing a 1998 purchase from a closed estate is its own project.

Put the sell-or-hold question in front of a cross-border professional while the window is still open enough to act on. This is a timing decision with a hard edge, and it is the kind that gets made by default when nobody raises it.

Frequently asked questions

Does the oleh exemption mean I pay no tax on my inheritance? Not quite, because Israel does not tax the receipt of an inheritance from anyone, oleh or not. Israel has no estate or inheritance tax. What the exemption affects is the income the assets produce afterwards and the capital gain when you sell.

Does the exemption cover assets I inherited after making aliyah? For an oleh chadash or senior returning resident, section 97(b)(3) applies regardless of when the asset was purchased, so an inheritance received during the window is reached. For an ordinary returning resident, section 97(b)(2) is limited to assets acquired while a foreign resident, and an inheritance received after the return is not.

What happens if I sell after the ten years are up? The exemption is not cancelled outright. A linear apportionment applies, treating the appreciation attributable to the period through the end of your window as exempt and taxing the growth after it. But the measurement runs from the deceased's original purchase date under the continuity principle, not from the date of death.

Does Israel recognise the US step-up in basis? Not automatically. The US resets basis to date-of-death value under 26 USC 1014. Israel applies continuity instead. There is a green-track application on Form 905 for a step-up on assets inherited from a foreign resident, which is a separate route and worth asking about specifically.

I made aliyah in 2026. Is anything different for me? The tax exemption is the same. The reporting exemption is not: the 2 April 2024 amendment requires those who became residents on or after 1 January 2026 to report foreign income and assets during the window even when no Israeli tax is owed.

Does any of this reduce my US tax? No. US tax follows citizenship, so Form 1040, FBAR, Form 8938 and PFIC reporting continue unchanged. Because you pay no Israeli tax during the window, there is also no Israeli tax available to claim as a foreign tax credit against your US liability on that income.

Where a professional takes over

This page maps the shape of the problem: a ten-year clock that starts at your residency date, a capital gains exemption whose reach depends on which status you hold, a continuity principle that measures gain from the deceased's purchase rather than the death, and a US tax system that is unmoved by all of it.

What it cannot do is tell you your residency start date, confirm your status under section 97, value the position, or make the sell-or-hold call. Those carry real dollar consequences in both directions and they are time-limited, which is exactly the combination where a cross-border tax professional earns their fee. Engaged with years left on the clock, not in the spring after you sold.