The reports, which were cause for ridicule in local media, come as the head of the rightwing Likud party prepares to seek re-election in a snap March vote.
In a long Facebook post, Netanyahu hit out at "false accusations against me and my wife that seek to topple the Likud and bring the left to power."
"All of this aims to detract attention from what is really important -- who will lead the country," he wrote.
Over several years, the Netanyahus through this practice earned at least 4,000 shekels (USD 1,000, 885 euros) of what should have been public money, the reports said.
They returned USD 1,000 to the state in 2013, the Haaretz website reported.
But Haaretz also cited a former employee of the Netanyahus as saying that the figure was in fact thousands of shekels higher.
Local media were quick to ridicule Sara.
Haaretz published a cartoon featuring her sitting in her living room, surrounded by empty bottles and pointing at a TV showing the latest frontier flare-up between Israel and Lebanese militant group Hezbollah.
"I need them to take something to the supermarket," she barks down a telephone, pointing at attack helicopters shown on the TV.
Pro-Netanyahu freesheet Israel Hayom slammed the reports as "defamation" as the country's political parties prepared for the campaign trail.
The snap vote on March 17 will pit Netanyahu's Likud and other possible rightwing allies against a united centre-left front that includes former justice minister Tzipi Livni's Hatnuah and the Labor party.
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