Recognized expenses for a builder: the full stack table
A builder's stack in 2026 costs real money: a Claude subscription, a Cursor subscription, API credits, servers on Vercel, domains, and ten more small tools. The good news: almost all of it is a recognized business expense that reduces your tax. The less familiar news: there is a big difference between "recognized for income tax" and "deductible for VAT" - and that is exactly where most builders either lose money or get it wrong. Let us sort it out, item by item.
Two separate tracks: income tax and VAT
Before the table, the distinction everything rests on - because it is exactly where wrong information circulates in founder groups:
- Income-tax recognition: an expense incurred in producing income reduces the profit subject to tax. This works on invoices from foreign vendors too - a Claude subscription paid to Anthropic is a fully recognized expense, as long as there is an invoice and documentation.
- Input VAT deduction: relevant to an osek murshe only, and only on Israeli VAT actually paid - that is, on expenses with an Israeli tax invoice. An invoice from a foreign vendor (OpenAI, Vercel, AWS billed from abroad) does not include Israeli VAT, so there is nothing there to deduct.
The sentence that will save you arguments online: "you get 18% back on everything" is not accurate. You get income-tax recognition on everything (worth your marginal rate on every shekel of expense), and VAT deduction only on Israeli expenses. Both are worth real money - but it is different money, through different channels.
The table: a builder's stack, item by item
| Expense | Recognized for income tax? | VAT to deduct? (murshe) |
|---|---|---|
| AI subscriptions - Claude, ChatGPT, Cursor, Copilot | Yes - an ongoing expense in business use | No - billed from abroad, no Israeli VAT |
| API credits (Anthropic, OpenAI) | Yes | No (foreign vendor) |
| Hosting and infrastructure - Vercel, AWS, Cloudflare, Supabase | Yes | No (foreign vendor) |
| Domains, foreign SaaS (Figma, Notion, GitHub) | Yes - in the business portion | No (foreign vendor) |
| Software and services from an Israeli vendor | Yes | Yes ✓ |
| Computer, screen, peripherals (from a store in Israel) | Yes - usually spread as depreciation | Yes ✓ in business use |
| Mobile and home internet | Yes - in the proportional business share | Partial - according to business use |
| Working from home (electricity, municipal tax, proportional rent) | Yes - proportionally to the work room, subject to conditions | As a rule, no |
| Coworking / rented office | Yes | Yes ✓ |
| Accountant, lawyer, professional advice in Israel | Yes | Yes ✓ |
| Professional courses and training | Yes - where it maintains and extends existing knowledge in your field; studying a new profession, no | Depends on the vendor |
| Conferences in Israel, tickets and business travel | Yes, within the rules (abroad - special rules) | Partial |
| Marketing - ads, newsletter, freelancers | Yes | According to the vendor (Israeli / foreign) |
| Light refreshments at the place of business | 80% of the expense | Partial |
| Meals with clients or partners | As a rule, no (a mixed expense) | No |
The table reflects general principles as of 2026; the precise recognition rates depend on circumstances. A vehicle for the self-employed is a subject of its own with its own rules.
A new computer? How depreciation works, briefly
Equipment that serves you for several years - a computer, screens - is not recorded in full as an expense in the year of purchase, but spread over its useful life as "depreciation" (for computer equipment, a relatively high annual rate). The practical meaning: the laptop you paid 10,000 ILS for is fully recognized, just spread over a few years. An osek murshe also deducts the VAT on the purchase (when bought in Israel, in the business portion). What matters from you: a tax invoice in your name (not just a shop receipt), and documentation if the equipment is also used privately.
Working from home - the proportion that makes the difference
Most builders work from home, so the principle is worth knowing: when a room in the home is actually used for the business, the proportional share of household expenses can be recognized - electricity, municipal tax, and sometimes rent or additional components - according to the ratio of the work room to the apartment (for example, one room out of four equals a quarter). That is a non-trivial amount over a year, but it is also an area with conditions and sensitivities (for example tenants versus owners, and possible implications worth knowing in advance). Our recommendation: do not activate this on your own based on a post - let us calculate the right ratio and document it properly, once.
Three golden habits of expense documentation
- Every subscription - an invoice, every month. Go once into the billing settings of every vendor (Anthropic, Cursor, Vercel...) and make sure a monthly invoice arrives at a dedicated mailbox. Five minutes that sort out years.
- A separate credit card for the business. All the stack expenses in one place means no receipt goes missing, and the annual return gets built in an hour instead of a day.
- A vendor in mixed use? Set a ratio in advance. A ChatGPT subscription used for work and for Friday dinner menus alike - declare a reasonable and consistent business share, not an automatic 100%.
Want us to go over your stack together and make sure no money is left on the floor - and also that we are not "stretching" recognitions that come back at you in an audit? Send us a message. And if you are an osek murshe selling abroad, see how much Israeli input VAT your expenses return in the zero-rate VAT guide.
A licensed Israeli CPA (license no. 500125101) accompanying businesses and self-employed clients across Israel - including founders, builders and owners of digital products. Bookkeeping, filings to the authorities, annual reports and personal financial guidance. About Adir →
Official sources
- Kol Zchut - recognized expenses for the self-employed (Hebrew)
- Israel Tax Authority - expense deduction and depreciation (Hebrew)
- Kol Zchut - the esek zair track (the normative 30% deduction) (Hebrew)
The information in this guide is general only, current as of August 2026, and does not constitute tax advice or a substitute for professional advice fitted to your business's circumstances. It is a condensed adaptation of our fuller Hebrew guide. For personal advice - talk to us.
A builder's expenses - the questions everyone asks
A ChatGPT or Claude subscription I also used for personal things - is it recognized?
A mixed expense is recognized in its business portion. In practice, when the primary use is business (building the product, professional writing), it is customary to recognize a reasonable and reasoned proportional share. The important principle: consistency and documentation - set a sensible ratio and stay with it, rather than inventing a different percentage each year.
I do not have an invoice in my name - only a credit card receipt. Is that enough?
A credit card statement alone is weak evidence - it proves payment, not substance. With digital vendors you can almost always download a proper invoice from the account settings, usually retroactively too - and it is worth investing one hour to complete the back catalogue. From now on: set up an automatic invoice by email with every vendor.
I bought the computer before I opened the business. Is it lost?
Not necessarily. Equipment purchased before opening the file that serves the business can generally enter the books and be recognized (through depreciation), subject to documentation of the purchase and to the circumstances. The same principle applies to other start-up expenses. Collect the invoices and we will examine together what is recognizable - do not give up on it in advance.
What is better for me - collecting receipts or the esek zair track with an automatic 30%?
A key question for anyone within the track's conditions: if your real expenses are below 30% of turnover, the normative deduction of esek zair is probably better (and frees you from managing receipts for income tax). If your stack is expensive, or you bought equipment, actual expenses will win. It is a five-minute calculation on your numbers, and we do it for clients every year afresh.
I am an osek patur - is there any point in keeping receipts?
Absolutely: income-tax recognition works for a patur exactly as it does for a murshe - expenses reduce the profit subject to income tax and to National Insurance. What a patur does not have is VAT deduction. So yes, every Cursor invoice is worth real money to you in the annual return, as a patur too.