Tax refund after completing studies
Graduates with an academic degree, certificate, or continuing professional education, are entitled to tax credit points for the years following completion of studies. However, in reality, many working taxpayers only take advantage of this benefit a few months after the fact or even don’t take advantage of it at all – sometimes out of a lack of awareness or due to mistakes their employer has made. This creates a situation where the individual is entitled to a tax refund, which can be obtained by filing a tax return for the relevant year.
An academic degree is an important thing, both because it opens the door to the better employment opportunities and because it can offer a higher salary, but it’s also better for the country. A more educated population is essential for developing the local economy, which is why the country encourages the public to pursue further education through tax benefits (tax refunds for completion of study) for graduates of a degree or professional studies. But it seems that not everybody is aware of the fact that they are entitled to a tax refund for their studies.
According to the tax method generally applied within Israel, there are credit points which reduce a taxpayer’s tax obligation. Credit points are awarded in various circumstances: completion of academic studies is one of the reasons which entitle wage earners to tax credit points.
Any individual who has completed academic studies in an institution of higher education recognized within Israel is entitled to credit points. This tax benefit is limited in time and adapts to the type of degree, but you also have some flexibility in how you take advantage of this benefit, which we’ll explain here.
Tax credit points are determined according to information you provide using Form 101, but even if you haven’t provided your details on time, and haven’t enjoyed this benefit up until now, remember that it’s possible to claim tax refunds up to 6 years retroactively from the end of the tax period.
Tax refunds for the completion of studies can be a substantial amount and you are absolutely entitled to receive the money from this benefit.
Tax credit points for an academic degree
Any individual who has completed studies for a Bachelor’s degree, from the year 2014 onward, is entitled to a single tax credit point. The value of this benefit is ₪2,628 per year (depending on the year) and what this means is that this amount is withheld from the tax you must pay. This credit is provided beginning from the tax year following the year in which you completed your studies, or the year after. This entitlement is provided for a single year.
One interesting point is that if, for instance, you finished your Bachelor’s degree studies in 2018, you may receive the benefit for the tax year 2019 or 2020, whichever you prefer. This is important to know since with careful tax planning, you can maximize the benefit you receive. Individuals who have completed a Bachelor’s degree expect to find a great job for a high salary, but we all know it’s not easy to find work right away when you finish your degree. It’s possible that you might find yourself continuing to work at temporary jobs at a lower salary even after you’ve finished your degree. Which means that it might be better to take advantage of this tax benefit in the second year, because with a lower income, your tax obligation could be less than the amount of the entitlement.
What about professions that require an internship? Accounting, law, tax advisors, property appraisal, or medicine all require a period of internship which permits postponing taking advantage of the benefit until the year following the internship, though the internship must begin in the tax year in which studies ended or no later than the following tax year. We all know that an individual’s salary is particularly low during internship, which is why it’s reasonable to assume that it’s best to defer taking advantage of this benefit.
Credit points for advanced degrees
Master’s degree studies also provide tax benefits of half a credit point. This tax benefit is provided for a single year and may be utilized in the tax year following completion of degree studies, or in the following year, just as with Bachelor’s degree. And in the same way as well, in professions which require internship, it’s possible to defer taking advantage of the benefit until the year following internship, which is the most worthwhile option in situations where your tax obligation the year you finish your degree is lower than the amount of the benefit.
This benefit is also provided to individuals who complete studies for a PhD on a course of direct doctorate studies, and this is added to the credit points for the Bachelor’s degree.
Tax refunds for medical or dental studies
An individual who has completed medical or dental studies is entitled to credit points in the year following completion of their degree, or the year following, along with another year with half a credit point after that. For instance – if you completed your medical degree in 2015, you can choose whether to apply the credit points in 2016 or 2017. If you chose to apply it in 2016, then in 2017, you will enjoy an additional half credit. If you choose to apply your credit point in the year 2017, then you will receive the half-credit in 2018.
Credit points are cumulative, meaning it’s possible to apply benefits for Bachelor’s and Master’s degrees at the same time; however, it’s not possible to apply the benefit for professional studies at the same time.
Tax refunds for professional studies
Professional studies also entitle you to a tax benefit. In order to receive this tax benefit, you must meet three eligibility criteria:
- Completion of 1,700 hours of study
- You cannot also apply credit points for a Bachelor’s or Master’s degree
- You have received a professional certificate recognized by a government institution
As of 2014, a half-point credit is provided for one year only which is possible to receive in the year following the eligibility for a certificate or for one year afterwards.
As of 2017, a credit of 0.75 credit points is available for one year only which may be received in the year following eligibility for a certificate or for one year afterwards.
As of 2018, individuals completing professional studies are eligible for an entire credit point for one year, which may be applied in the year after completing studies or in the following year.
If you have completed academic studies or a course of professional studies, and you haven’t submitted your certificate of completion of study to your employer, you won’t be able to take advantage of your tax credit points. But even if years have passed, it’s still not too late to request the money you’re entitled to. You can request a tax refund for up to 6 years retroactively from the end of the tax year.
Get what you’re entitled to – we’ll help you receive the money you deserve without any additional effort.