Last Updated on January 28, 2026

A Roth IRA is an incredible US retirement account that lets you invest every year and watch your money grow — completely tax-free — for life. It’s easy to manage, can be opened with little to no fees, and offers powerful long-term benefits. But what happens if you make Aliyah? Will Israel agree that it stays tax-free?

Unfortunately, Israeli tax law provides little to no official guidance on how Roth IRAs are treated. There are no court cases or clear rulings from the Israeli Tax Authority (ITA), leaving the issue murky and open to interpretation. On top of that, complex US tax rules often make it difficult for American Olim to take full advantage of Israeli retirement vehicles. All of this makes it challenging for Olim to evaluate their best options.

This guide is split into two parts. First, we’ll explore the main opinions on how Roth IRAs opened and funded before Aliyah are treated in Israel. Then, we’ll dive into the considerations for those who want to continue or strart contributing to a Roth IRA after moving to Israel.

The goal of this article is to help you understand the key issues so you can have a more informed conversation with your tax professional. This is not intended as tax advice.

Moving to Israel with a Roth IRA

Is it a good idea to open up a Roth IRA if you plan to make Aliyah one day? Will Israel recognize the amazing tax benefits the same way the US does? Let’s break it down.

What is Seif 9 Gimel (סעיף 9ג)?

Seif 9 Gimel is a section of Israel’s Income Tax Ordinance that gives certain tax benefits to new Olim and returning residents. It basically says: if you’re getting a foreign pension, Israel won’t tax it more than what you would have paid if you had stayed in your original country and had no other income that year.

In plain English? If the U.S. wouldn’t tax you on a specific pension withdrawal, then Israel shouldn’t either.

If this section applies to Roth IRAs or Roth 401(k)s, it’s great news for American Olim. That’s because qualified Roth withdrawals after age 59½ are totally tax-free in the U.S.

But here’s the issue — Roth IRAs don’t check the usual boxes for what Israel considers a “pension” (קצבה). Israeli tax law generally characterizes a pension as being from a recognized employer plan, funded with pre-tax dollars, and consisting of periodic payments made at retirement – none of which is technically true of a Roth IRA.

That’s why Roths fall into a tax grey area in Israel. Depending on who you ask, you’ll hear very different answers on how they should be treated. Here are some of the main opinions:

Opinion 1: Roth IRA is covered under סעיף 9ג׳

What this means

If you opened and funded your Roth IRA before making Aliyah, this opinion says it’s covered under Seif 9 Gimel — and stays tax-free in Israel during your lifetime. That means no Israeli tax on growth, dividends, or future withdrawals.

Implications:

• No Israeli tax on dividends or growth inside the account
• No tax on withdrawals, even after the 10-year Aliyah holiday
• This would set up the Roth IRA and Roth 401k as the only retirement vehicle that can grow tax free in both the US and Israel. Pretty powerful.

Potential rationale:

This opinion hinges on the idea that the Roth IRA meets the spirit (if not the letter) of סעיף ג׳: It’s a long-term retirement account with withdrawal restrictions and retirement-focused incentives funded by work related income. Olim set up these accounts in good faith based on the tax system they were under at the time and shouldn’t be penalized for it.

The retirement systems in Israel and around the world have changed dramatically over the past decades (moving away from defined benefit to defined contribution plans) and the definition of “pension” (קצבה) has likely evolved with it.

In addition, Roth IRAs have been around since 1998 without any clarity – there’s room to interpret סעיף 9ג׳ broadly — at least until official guidance says otherwise. Many Israeli accountants are comfortable taking this approach.

Caveat:

This is the most optimistic take — and it comes with risk. A future ruling, audit, or legal change could shut this door. Some professionals argue that Roths don’t meet the technical definition of a pension, and relying on סעיף 9ג׳ could backfire. Proceed with caution.

Opinion 2: Roth IRA is a taxable investment account

What this means

Some professionals argue that since Roth IRAs are not recognized or privileged in any way under Israeli tax law.

Implications:

• After the 10-year Aliyah tax holiday, Israeli tax would be owed annually on: capital gains, dividends and interest.
• Even though the account is tax-free in the U.S., Israel would not give it any special treatment
• You’d get all the restrictions of a Roth without any of the benefits — Olim might want to avoid Roths completely.

Potential rationale:

Roth IRAs simply don’t reflect the legal definition of a pension and aren’t qualified. Treating every kind of foreign tax-advantaged account as a pension would be a slippery slope. And let’s be honest — If someone like Peter Thiel ever made Aliyah with his multi-billion dollar Roth, you can bet the ITA would be quick to challenge it in court.

Caveat:

This is the most conservative (and tax-heavy) interpretation. It strips away the Roth’s U.S. tax benefits entirely. Plus, since U.S. brokerages don’t issue 1099s for Roth IRAs, you’d need to manually track and report all income inside the account to Israeli authorities.

That said, it’s still fairly easy to find Israeli accountants who are willing to take a more lenient approach — at least today.

Opinion 3: Gains in a Roth IRA are tax deferred

What this means

This middle-ground view says that Roth IRAs aren’t taxed annually in Israel — but they are taxed when you start taking money out. In other words, growth inside the account isn’t taxed each year, but distributions in retirement could be.

Implications:

• No Israeli tax owed on annual growth, dividends, or interest while the money stays in the account
• After the 10-year Aliyah holiday, withdrawals may be taxed (partially or fully)
• Tax could be applied to the portion of each distribution that’s considered “gains” (not principal)
• How the withdrawal is taxed — as passive income or “other retirement income” — would depend on interpretation.

Potential rationale:

This interpretation mirrors how some foreign “pensions” are handled in Israel that don’t qualify under סעיף ג׳.

Caveat:

There’s still a lot of uncertainty here — especially around how to report distributions, and how to separate principal from gains. While this approach avoids annual taxation, it also misses out on סעיף 9ג׳’s more generous tax treatment. It’s less risky than Opinion 1, but less conservative than Opinion 2.

Key takeaways

• If you made Aliyah with an existing Roth IRA, make sure to keep clear documentation of all past contributions (Form 5498) and any withdrawals (Form 1099-R).
• At this point, it’s still fairly common to find accountants in Israel who are comfortable treating Roths as tax-free or tax-deferred — but that could always change.
• Avoid making additional contributions to the same Roth IRA after you’ve made Aliyah.
• Converting a Traditional IRA or 401K to a Roth has significant risk attached. Traditional accounts may actually line up better with Israel’s pension definitions than Roths do.
• If you’re already retired or nearing retirement when making Aliyah, consider withdrawing your full Roth balance during your 10-year tax holiday. That may be your safest path to avoiding future Israeli tax headaches.

Funding a Roth IRA while living in Israel

So what if you want to keep contributing to a Roth IRA after you’ve already made Aliyah?

Here’s the short answer: it’s tricky. No matter which opinion you follow about pre-Aliyah Roths, סעיף 9ג׳ doesn’t apply to retirement accounts funded with Israeli-sourced income. It also doesn’t apply to lifelong Israeli residents. So it’s a tough argument to make that post-Aliyah Roth contributions should grow tax-free in Israel.

That means funding a Roth while living in Israel usually doesn’t offer the same benefits as it would for someone living in the U.S. Still, there are some cases where it might make sense. Let’s break it down.

How would Israel tax it?

There are different opinions here too. Some accountants lean on סעיף 9ב, which offers partial tax relief for certain types of retirement income. Under this section, 35% of a qualifying pension distribution is tax-exempt in Israel. That means if you withdraw $100,000 in retirement, only $65,000 would be taxable — and that would be taxed at your regular Israeli income tax rate.

Others argue again that Roth IRAs still don’t qualify as pensions at all. So instead of getting any special treatment, they’d be taxed just like a regular brokerage account — with annual Israeli tax on dividends, capital gains, and interest starting after your 10-year holiday.

Isn’t the Israeli pension system enough?

For most people living and working in Israel — yes, it probably is.

As a general rule of thumb, saving around 15% of your income puts you on track for a solid retirement. In Israel, the pension system actually goes beyond that: once you factor in employer, employee, and severance (pitzuim) contributions, most employees are saving over 20% of their income automatically.

That’s a pretty strong baseline.

So the question becomes: do you really want to lock up even more money in a U.S.-based account that comes with unclear Israeli tax treatment and withdrawal restrictions? For most employees in Israel, the answer is no. There are usually better vehicles for short-term savings and non-retirement goals.

Won’t my Israeli employer pension cause me US tax problems?

It might — that’s one of the tougher realities of being a U.S. citizen abroad.

Israeli pensions are mandatory, but the IRS doesn’t always recognize them the same way. That means you could end up dealing with punitive U.S. taxation and complex reporting requirements (PFIC & foreign trust reporting)

In countries without tax treaties that specifically protect local retirement accounts, many U.S. expats are advised to avoid foreign pensions altogether. But in Israel, you don’t really have a choice — contributions are required by law.

Because of that, most U.S. tax professionals in Israel take the position that Israeli employer pensions qualify for exemptions under “employer retirement trust” rules. There’s risk to this approach and the IRS could challenge this view in the future. The U.S.–Israel tax treaty doesn’t clearly protect Israeli pensions like it does for other countries.

Bottom line: contributing to an Israeli pension as an employee is compulsory, has significant Israeli tax advantages, and is supported by most U.S. tax professionals.

What about someone who is self-employed?

If you’re self-employed in Israel, things get even messier from a U.S. tax perspective. Many US accountants recommend limiting contributions to the minimum required by law. Some believe that the benefits outweigh the risks and are OK with contributions to pension above the minimum (but not to Keren Hishtalmut). Other US accountants even argue in favor of skipping contributions entirely and paying the penalty instead to avoid the burden/risk of US compliance (see Yaacov Jacob’s article on this for a deeper understanding).

If you decide to contribute zero or the minimum to Israeli pension, you likely won’t be saving enough for a comfortable retirement. Contributing to a Roth IRA and/or solo Roth 401k could be one of the few decent retirement savings options available to you — even with the risks. Those who are eligible can put away tens of thousands of dollar each year into potentially tax advantaged retirement accounts. But always check first with your U.S. accountant – and be sure to discuss contribution limits relevant to your situation for a Roth IRA, Spousal Roth, & Solo Roth 40K.

Are you even eligible?

Before contributing to a Roth IRA from Israel, make sure you’re actually allowed to.

To be eligible:

• You must have earned income (like salary or self-employment income) reported on your U.S. tax return for that year
• If you use the Foreign Earned Income Exclusion (FEIE) to exclude all your income, you’re not eligible to contribute
• If you use the Foreign Tax Credit instead — which many Americans in Israel do — you likely are eligible

There are also income limits:

• For 2025, contributions begin to phase out at $150,000 (single) and $236,000 (married filing jointly)
• Above those thresholds, your ability to contribute may be reduced or eliminated

Double-check with your U.S. accountant before moving forward. The contribution limit for 2025 is $7,000 (or $8,000 if you’re 50 or older).

Bottom line

• For most people living and working in Israel, making an annual contribution to a Roth doesn’t make a whole lot of sense.
• But there are a few scenarios where it might still make sense:
  • You’re a U.S. citizen living in Israel now but planning to move back to the U.S. in retirement — contributing could still be worth it
  • You’re self-employed, eligible to contribute, and your U.S. accountant recommends limiting or skipping Israeli pension contributions

There are no 100% perfect answers here. As always: talk it through with your accountant, weigh the trade-offs — and hope for the best!