Charity used to begin at home, but now in Israel, it begins on the home page. As of January 1, the Israel Tax Authority required all charities to move over to an online system of digital donations called “Israel Donations” (Terumot Yisrael). That’s if donors want to continue enjoying a tax break for their generosity. The aim is to stamp out fake donation receipts.
Main tax break
Donations to charities ranging from NIS 207 to NIS 10,354,816 (in 2026) generally confer a 35% tax credit for individuals, or 23% for companies, if various conditions are met. In particular, the charity must be approved by the ITA (under Israel Tax Ordinance Section 46), and the tax break is capped at 30% of taxable income. For example, if you donate NIS 1,000 to an approved charity, your tax bill may go down by NIS 350.
How it works
The Israel Donations system electronically issues the charity a report number to be inserted on each donation receipt in addition to the regular receipt number. The donor doesn’t have to keep the receipt in paper form to claim a tax break.
Instead, starting in 2026, details of each donation reported are immediately stored electronically on the ITA’s system. The donor can access these details in his online “personal area” (Eizor Ishi) in the ITA system.
If you haven’t yet logged onto your “personal area,” you will need to sooner or later. This is how the government now communicates with you without postal delays.
The donor can use the digital donations to claim the charity tax breaks in his or her annual tax return.
But the individual can claim the tax break sooner if: (1) his employer has appropriate payroll software that can handle digital donations and give the tax break on the next monthly paycheck, or (2) when doing a tax adjustment (Tium Mas) if someone has more than one employer.
If the employer has the appropriate software that can handle digital donations, the employee still has to agree to its use. The employer only gets to know how much in total the employee donated, not which charities benefited.
Employees cannot claim the tax break for donations over NIS 25,000 per year via their employer. If they do donate more than this amount, they can only claim a tax break for the excess after the year-end on an annual tax return.
If the employer uses a payroll bureau, there are procedures enabling them to provide the charity tax breaks on their software. Only employees designated by the senior management of the bureau can deal with this.
Self-employed freelancers can only claim tax breaks on their annual tax return.
In all cases, donors need to give the identity number to the charity so that they can be credited with each donation in the Donations Israel system.
What the charity should do
To qualify for approval under ITO Section 46 (meaning their donors get tax breaks), charities must register on the Israel Donations system and say which charity personnel are authorized for these purposes.
The new Israel Donations system is available to charities that issue digital donation receipts to named donors whose identity number is known. In the case of charities still issuing paper receipts, another online app can be used to obtain the report numbers for each donation receipt. But this is less recommended, as it involves keying in manually all the donation information into the system. So, charities (local synagogues, etc.) should consider investing in digital-receipt software.
Donations can be in a foreign currency if a special currency code number is added. If donations are by way of standing order, receipts must be issued each year for amounts received in that year. Donations in kind must be marked “in kind.” Donations can be anonymous if marked “anonymous,” but the donor gets no Israeli tax break.
Comment – US olim
The US-Israel tax treaty lets Israeli residents receive both the above 35% Israeli tax credit and a deduction under US law if they are also US taxpayers. This applies to charitable contributions to a charitable organization for US tax purposes that support Israeli causes, i.e., US “Friends of Israel” organizations. The tax break is limited to contributions not exceeding 25% of taxable income from US sources.
Unfortunately, it is not clear whether US olim (immigrants) donating to US Friends of Israel charities can avail themselves of the new Israeli digital donation system.
As always, consult experienced professional advisers in each country concerned at an early stage in specific cases.
leon@hcat.co
The writer is a certified public accountant and tax specialist at Harris Consulting & Tax Ltd.