Basic fundamental terms regarding the tax table and income tax:

1. All information is relevant to the 2012 tax year only.
2. Taxable income: The law in the United States determines a minimum income that incurs a tax liability, depending on your filing status and the amount of dependents claimed on your tax return(personal exemption + Standard deduction).

For example: If at the end of 2012 you were single, under the age of 65 ,had no dependents and your total income didn’t exceed 9750$ that income will have no tax liability and will not be calculated on the tax table.

This definition holds in the first and most important advantage for you. Due to the fact that the vast majority of American citizens living in Israel don’t have a tax liability in the United States because of the tax treaty – all income earned in the United States through the various investment options that didn’t exceed the amount above will result in having zero tax liability!

For example: Capital gains earned in Israel in the amount of 9750$ would have been charged a 10,000 NIS tax (25% tax rate for capital gain) where In the United States for this type of income you would have no income tax liability at all!

1. Ordinary income: income that incurs a tax liability determined by the following tax table.
2. There are different types of income, and the amount of tax they incur is set by many different variables, too complicated to show in this tax table. Wanting to simplify matters, we decided to list the reasonable tax liability which usually will be determined.
3. In order to determine your exact tax liability, please review the links in the appendix.