Concerning
Rising Costs in Israel for 2026: Arnona, Electricity, and Beyond – What Households Need to Brace For
With inflation projected at 2.9% for the year, down from 3.7% in 2025 but still above the Bank of Israel's target, several key expenses are on the rise, driven by fiscal policies aimed at managing a national debt hovering around 69% of GDP.
As Israelis ring in the new year, many are facing a sobering reality: a wave of price hikes across essential services and taxes that could squeeze household budgets. From municipal taxes to utilities, here's a breakdown of what's increasing and how it might impact you.
Arnona (Municipal Property Tax) Hikes Lead the Charge
The annual arnona adjustment for 2026 is capped at a modest 1.6% nationwide, a significant relief from the 5.27% jump in 2025. However, around 90 local authorities have sought approval for additional increases, potentially adding tens to hundreds of shekels to monthly bills depending on location and property size. Notable examples include Ramat Gan's 6.5–8.5% rise, Ashkelon's 7.5% for industrial properties, and a staggering 17% in Beit Aryeh. In Jerusalem, the changes are particularly targeted: small apartments under 120 square meters could see up to 39% increases, while larger ones face 22% hikes. Tel Aviv residents, meanwhile, can expect rates between ₪70–₪120 per square meter annually. These adjustments, effective today, stem from local budget needs and could exacerbate housing affordability issues in a market already strained by shortages.
Electricity and Utilities: Small But Steady Increases
Electricity tariffs are up by 1.5% for the first quarter of 2026, translating to an extra ₪5.9–₪6 per month for average households and up to ₪10 for larger ones. This rise is attributed to currency fluctuations, consumer price index (CPI) adjustments, Bank of Israel interest rates, and coal costs. Looking ahead, prices will now be recalibrated every six months, and a massive ₪90 billion investment in the national grid through 2030 will gradually be shouldered by consumers.
Water bills aren't spared either, with a 2.49% increase adding about ₪3 monthly for a typical four-person family consuming 16 cubic meters, more for bigger households.
Cooking gas prices have jumped around 5%, influenced by higher excise taxes and index-linked costs, which may also trickle down to higher restaurant prices.
These utility hikes, effective today, come amid efforts to promote sustainability, including a gradual carbon tax on fossil fuels and natural gas rising to €18 per tonne of CO₂ equivalent by 2030.
Fuel, Taxes, and Broader Fiscal Pressures
Fuel costs are set to climb with phased increases in excise and purchase taxes on gasoline and diesel through 2030, part of Israel's emissions reduction strategy. While no dramatic spike is slated for early 2026, monthly adjustments tied to global oil prices and a stable surcharge of ₪0.25 per liter could add up.
The 2026 state budget, approved last month, introduces several tax measures that indirectly raise living expenses, potentially costing families ₪800–1,200 monthly (or ₪9,600–14,400 annually). Key changes include frozen income tax brackets (eroding take-home pay by 2–2.5% due to inflation), no rollback on the 18% VAT rate (adding ₪150 monthly for ₪15,000 spenders), and higher National Insurance premiums for low earners (up to ₪48 monthly). New levies target vacant non-agricultural land (1.5%), real estate sales (2% for investors), e-cigarettes (₪1 per ml liquid and ₪30 per device), and potentially single-use plastics, sugary drinks, and vehicle mileage (replacing fuel taxes for EVs).Child benefits remain frozen at ₪169 for the first child and ₪214 for others, while the "Savings for Every Child" program stalls, costing about ₪3 per child monthly over time. Public sector wages face a 1.2% cut, impacting hundreds of thousands.
Potential Impacts on Housing, Food, and More
Housing rents could feel additional pressure from ongoing shortages, with projections adding up to 3.1 percentage points to inflation by 2029 if labor constraints persist. Climate adaptation requirements, like improved insulation, may nudge construction costs higher, though they promise long-term energy savings. Food prices, already up 8% in early 2025 against CPI, remain elevated due to market concentration and population growth, though no specific 2026 hikes are announced.
Silver Linings and Economic Outlook
Not all news is grim: The budget widens income tax brackets for 20% and 31% rates, providing relief for middle-class earners, and offers 0% tax on certain income for new immigrants' first two years. Economists warn that these measures aim to balance the books post-COVID and amid regional tensions, but critics argue they disproportionately burden lower-income groups.As Finance Minister Bezalel Smotrich defends the budget as "responsible," households are advised to review bills closely and explore rebates or efficiencies.