Quick Answer: Donations to an Israeli charity can earn you a tax credit worth 35% of the amount you give, but only if the organization holds approval under Section 46 of the Income Tax Ordinance and you donate at least NIS 207 during the tax year. The credit comes straight off your Israeli tax bill. It is worth nothing if you have no Israeli tax to reduce, which is the trap that catches most foreign givers.

Diaspora families and new immigrants give generously to Israeli causes, from hospitals and yeshivas to soup kitchens and army welfare funds. Most keep the receipt without ever asking whether it does anything for their taxes. The honest answer is: sometimes, and it depends almost entirely on where you owe tax. This charitable donation tax credit is one of the few reliefs in Israeli law that is genuinely easy to claim once you understand the ground rules, and one of the most commonly forgotten.

Israel does not let you deduct a donation from your income the way the United States does. Instead it gives a credit that reduces the tax itself. That single difference changes who benefits and by how much. A retiree living on a foreign pension under the ten-year exemption gets nothing from a 35% credit against zero Israeli tax. An oleh drawing an Israeli salary, or a non-resident paying Israeli tax on a Tel Aviv apartment, gets real money back. This guide walks through the rule, the numbers that set the amount, and the paperwork that trips people up.

1. How the Section 46 Credit Works

The whole mechanism sits in Section 46 of the Income Tax Ordinance [New Version], 5721-1961. An individual who donates money to an approved public institution (mosad tziburi) reduces their Israeli income tax by 35% of the sum given. A company reduces its tax by 23%, which tracks the corporate tax rate. Give NIS 1,000 to an eligible charity as an individual and your tax drops by NIS 350. The charity gets the full NIS 1,000; the state effectively funds NIS 350 of it through the credit.

Because this is a credit and not a deduction, it does not shrink your taxable income. It shrinks the bottom-line tax. And it is non-refundable: it can bring your tax down to zero, but the Israel Tax Authority will not hand you cash beyond the tax you already paid or had withheld. If your Israeli tax for the year is NIS 200 and your credit works out to NIS 350, you recover NIS 200 and the rest is not paid out (though part may carry forward, as explained below).

2. Who Can Actually Use It

Eligibility for the credit is not about your passport. It is about whether you have an Israeli tax bill for the credit to bite into. That puts givers into a few practical groups:

  • Israeli residents with local income. Salaried employees, the self-employed, and business owners taxed in Israel are the classic beneficiaries. The credit reduces the tax on their Israeli earnings.
  • Olim who earn in Israel. A new immigrant working an Israeli job pays Israeli tax on that salary from day one, even while foreign income sits under the exemption. Donations offset that Israeli salary tax.
  • Non-residents with Israeli-source income. A foreign national who pays Israeli tax on rental income from an Israeli apartment, or on Israeli director's fees, can apply the credit against that specific liability.
  • Companies. An Israeli company, including the local subsidiary of a foreign group, claims the credit at 23% against corporate tax.

The group that keeps getting disappointed is olim and retirees whose only income is foreign and therefore exempt. They give large sums to Israeli charities, hold beautiful Section 46 receipts, and have no Israeli tax to reduce. This is one of the most common misunderstandings about the credit, so it is worth checking your Israeli tax position before you count on the benefit.

3. How Much It Is Worth

The size of the credit is fixed by three numbers: a floor, a rate, and a ceiling.

  • The floor. Your total donations for the year must reach at least NIS 207 (the 2026 figure, adjusted for inflation each January). Scattered small gifts count together toward this floor.
  • The rate. 35% for individuals, 23% for companies.
  • The ceiling. Donations that exceed the lower of 30% of your annual taxable income or NIS 10,354,816 do not earn a credit in that year. Anything above the cap is carried forward and can be credited over the following three tax years.

A worked example makes it concrete. Say an oleh with an Israeli salary donates NIS 8,000 across the year to approved charities. She clears the NIS 207 floor easily, her donations are well under 30% of her income, and her credit is 35% of NIS 8,000, or NIS 2,800 off her tax. If instead she gave NIS 150 in total, she falls below the floor and gets nothing. If a high earner gave NIS 500,000 but 30% of taxable income capped the eligible amount at NIS 400,000 for the year, the NIS 100,000 excess would roll into the next three years rather than vanish.

In Practice: Section 46 of the Income Tax Ordinance sets the individual credit at 35% of donations of at least NIS 207 (2026), capped at the lower of 30% of taxable income or NIS 10,354,816. The Israel Tax Authority (Rashut HaMisim) allows unused amounts above the cap to be carried forward for three tax years. Keep a running tally through the year, because a single large year-end gift can spill over the 30% ceiling and force part of the benefit into 2027 and beyond.
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4. Which Charities Qualify

This is where good intentions most often fail. The credit only applies to gifts to an institution that holds a live Section 46 approval. Approval is not automatic when a nonprofit registers. It is granted by the Minister of Finance with the confirmation of the Knesset Finance Committee (Va'adat HaKsafim), usually for a defined period that the institution must renew.

Several thousand Israeli institutions hold the approval, including most well-known hospitals, universities, and welfare organizations. Plenty of smaller or newer nonprofits do not. Before you give with the credit in mind, do two things:

  • Ask the charity directly whether it has current Section 46 approval, and get that in writing.
  • Check the Israel Tax Authority's published list of approved institutions, which is searchable online and updated as approvals are granted or lapse.

A valid receipt should state the institution's name, its tax file number, the donation amount and date, and a note that it is recognized under Section 46. A few categories never qualify: donations to foreign charities that lack Israeli approval, contributions to political parties, and any payment where you received something of real value in return, such as a gala dinner ticket or a raffle entry. If you paid NIS 500 for a fundraising dinner worth NIS 200, only the genuine donation portion can support a credit.

5. How to Claim the Credit

How you claim depends on whether you file an annual return. There are three routes.

  • Through your employer during the year. A salaried employee can hand payroll the Section 46 receipts and ask for the credit to be applied through tax coordination, so it shows up in your monthly net pay rather than waiting for a refund.
  • Through your annual tax return. If you already file (the self-employed, company owners, high earners, many olim), you enter the donations on the return and attach the receipts. The credit is calculated automatically against your assessed tax.
  • Through a refund request if you do not file. A salaried donor who never submitted a return can file a refund application (commonly Form 135) for the relevant year, with the receipts and the annual Form 106 from the employer, to recover tax that was over-withheld.

Since 2025, the Israel Tax Authority has been moving donation reporting onto a mandatory digital system. Approved institutions increasingly report each gift electronically, which should make it easier for the Authority to match your claimed donations against the charity's records, and harder to claim gifts that were never actually reported. Hold on to the receipts regardless.

In Practice: The annual income tax return for 2026 is generally due by 30 April 2027, with online filers and represented taxpayers getting later dates. If you missed the credit in earlier years, the Israel Tax Authority will usually let you reclaim over-withheld tax for up to six tax years back under the refund rules in Section 160, so a salaried oleh who has been giving to a Section 46 hospital since 2021 can often recover several years of 35% credits at once by filing Form 135 with the receipts and the employer's Form 106.

6. Diaspora Donors, Olim, and US Givers

Cross-border giving is where the planning gets interesting, and where donors most often leave money on the table on one side of the ocean or the other.

For the Israeli credit, the gift must reach an Israeli Section 46 institution and you must have Israeli tax to reduce. A donation sent from abroad to an approved Israeli charity can still support the 35% credit, but only against your Israeli liability. If you have none, the Israeli credit is theoretical.

American donors have a parallel system to weigh. To get a US charitable deduction, US taxpayers typically give to a US 501(c)(3) organization set up as an "American Friends of" the Israeli cause, which then funds the Israeli institution. That gift earns a US deduction but not an Israeli credit. The US-Israel tax treaty (Article 15A) also allows a resident of one country a limited charitable deduction for gifts to organizations in the other, but only against income sourced in that other country and within local limits. You cannot generally claim full relief for the same shekel in both countries. For US citizens living in Israel, the practical question is which receipt to collect: the US one for US tax, or the Israeli Section 46 one for Israeli tax. Our US-Israel tax treaty guide covers how the treaty and the savings clause interact.

In Practice: An oleh in the first ten years pays Israeli tax on Israeli-source income (an Israeli salary, for example) but not on exempt foreign income. Section 46 credits only offset the taxed Israeli portion. It is common for American olim to donate through a US American Friends 501(c)(3) for the US deduction, then wonder why the Israel Tax Authority gives them nothing: the money never reached an Israeli Section 46 institution. If you want both the US deduction and the Israeli 35% credit, you usually need to split your giving deliberately between the two channels.

7. Where Donors Lose the Credit

The credit is straightforward, but a handful of avoidable errors send it to waste:

  • Giving to an unapproved or foreign charity. No Section 46 approval means no Israeli credit, however worthy the cause.
  • Missing or incomplete receipts. A receipt without the Section 46 reference and the institution's tax file number will not survive review.
  • Falling below the NIS 207 floor. Small one-off gifts that never add up to the annual minimum earn nothing.
  • Never claiming at all. Salaried employees who assume the credit is automatic often lose it entirely. It is not automatic unless you route it through payroll or file for it.
  • Expecting cash you never paid. The credit is capped by your actual Israeli tax. It reduces tax; it does not turn a donation into a government grant.

None of this is exotic. It is mostly paperwork and timing. Confirm the charity's status before you give, collect a proper receipt, track your total against the ceiling, and either use payroll or file to claim. If you have been giving for years without claiming, the six-year refund window is often the most valuable move on the table.