Deductible Expenses for an Osek Patur in 2026 - Complete Guide
How Can You Reduce Your Tax Burden and Save Money for Your Business?
For a self-employed business owner, deductible expenses are an important tool that can help you not only report correctly to the Israeli Tax Authority, but also reduce your taxable income and improve your business’s profitability.
In this guide, we’ll explain what deductible business expenses are, provide practical examples, cover some of the key rules, and explain how to report expenses correctly.
What Is a Deductible Business Expense?
Income Tax: Section 17 of the Israeli Income Tax Ordinance generally defines deductible expenses as expenses incurred in the production of income.
These include reasonable expenses incurred in operating and managing your business, such as:
- Office rent
- Electricity
- Business equipment
- Accounting and legal services
- Marketing and advertising
There are also mixed-use expenses – expenses that have both a business and personal component. Common examples include a private vehicle, expenses related to working from home, and refreshments.
Special rules determine how much of these expenses can be deducted for tax purposes.
Common Deductible Expenses for Income Tax Purposes
| Expense | Income Tax Deduction | Notes |
|---|---|---|
| 🏢 Office & Business Operations | ||
| Office or business premises rent | 100% | When used exclusively for the business |
| Municipal tax (Arnona) – business premises | 100% | |
| Municipal tax (Arnona) – home office | Proportionate | Based on the business-use portion |
| Electricity – business premises | 100% | |
| Electricity – home office | Proportionate | When working from home |
| Water – business premises | 100% | |
| Water – home office | Proportionate | When working from home |
| Cleaning and cleaning supplies | 100% | |
| Office supplies | 100% | Paper, folders, pens, etc. |
| Printing and binding | 100% | |
| Ink and toner | 100% | |
| Postage and deliveries | 100% | |
| 💻 Computers & Software | ||
| Computer | Depreciation | Generally approximately 33% per year |
| Monitor, printer, keyboard, mouse | Depreciation or expense | Depending on cost and classification |
| Software and subscriptions | 100% | Microsoft 365, Adobe, Canva, ChatGPT, etc., when used for business |
| Website hosting | 100% | |
| Domain name | 100% | |
| Website development | Generally depreciation | Depends on the nature of the expenditure |
| Cloud services | 100% | Dropbox, Google Workspace, etc. |
| 📞 Communications | ||
| Home internet | Proportionate | When working from home |
| Mobile phone | Proportionate | Based on applicable rules/business use |
| Office phone and internet | 100% | |
| 🚗 Vehicle & Travel | ||
| Fuel | Generally 45% | For a private vehicle, subject to applicable rules |
| Vehicle insurance | Generally 45% | |
| Vehicle maintenance and repairs | Generally 45% | |
| Business parking | 100% | Subject to applicable rules |
| Taxis for business purposes | 100% | |
| Road tolls | Based on use | |
| 📢 Marketing & Sales | ||
| Advertising and marketing | 100% | Google, Facebook, Instagram, etc. |
| Graphic design | 100% | |
| Business photography | 100% | |
| Business cards and brochures | 100% | |
| 👨💼 Professional Services | ||
| CPA services | 100% | |
| Bookkeeping | 100% | |
| Legal services | 100% | When related to the business |
| Business consulting | 100% | |
| Subcontractors | 100% | |
| 🏦 Banking & Finance | ||
| Bank fees | 100% | Business-related fees |
| Interest on business loans | 100% | |
| Payment processing fees | 100% | Credit cards, business Bit, etc. |
| PayPal / Stripe fees | 100% | |
| Amazon / Etsy and other platform fees | 100% | |
| 📚 Education & Professional Development | ||
| Professional courses | 100% | When related to maintaining or improving an existing profession/business |
| Professional training | 100% | |
| Professional conferences | 100% | |
| Professional literature | According to applicable treatment | |
| 🛡️ Insurance & Fees | ||
| Business insurance | 100% | |
| Professional liability insurance | 100% | |
| Cyber insurance | 100% | |
| Government fees | 100% | When business-related |
| Professional association membership fees | 100% | Subject to applicable rules |
| ☕ Refreshments & Hospitality | ||
| Coffee, tea, milk, sugar and cookies | Subject to applicable rules | Light refreshments |
| Fruit and vegetables for employees/clients | Generally 80% | Subject to the tax rules for refreshments |
| 🏠 Working From Home | ||
| Proportionate share of rent | Proportionate | Subject to applicable conditions |
| Proportionate share of mortgage interest | Proportionate | Subject to applicable conditions |
Need help determining which expenses you can deduct? Contact our office and we can help you manage your business expenses and tax reporting correctly and efficiently.
What About an Esek Zair (Small Business Tax Regime)?
If you are registered under the Esek Zair tax regime, it is important to understand that different rules may apply.
Instead of deducting individual business expenses one by one, an eligible Esek Zair may be entitled to a standard expense deduction equal to 30% of its revenue, subject to the conditions established by the Israeli Tax Authority.
This means that in many cases, there is no need to claim each individual expense separately for income tax purposes.
However, the Esek Zair regime is not necessarily the best option for every business. The applicable tax treatment and eligibility requirements should be considered based on the specific circumstances of the business.
In our complete guide, we explain:
- What is an Esek Zair?
- Who is eligible?
- How does the 30% expense deduction work?
- When can the Esek Zair regime be beneficial?
- What common mistakes should you avoid?
👉 Read our Complete Guide to Esek Zair.
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