Most olim give in both directions, to the Israeli organisations that suddenly surround them and to the causes they left behind, and collect tax relief in neither. Israel gives a 35% credit on approved donations1. The US-Israel treaty gives Americans a deduction for Israeli charities, capped at 25% of Israeli-source income4. Both have to be set up deliberately.
General information, not advice
Why do olim give in both directions and get relief in neither?
Because each tax system recognises only its own paperwork, and neither one comes looking for you. Your first Israeli year is full of small, sincere giving: the school fund, the local emergency drive, the neighbour collecting for a family. Almost none of it is documented in the form Israel wants, and none of it registers in the United States at all. Meanwhile the giving you kept up back home is documented perfectly, and Israel ignores it entirely.
A lifelong Israeli faces half of this. You face all of it, plus a complication a native never meets: for your first decade here your foreign income sits outside the Israeli tax net3, which changes which of the two systems your giving can usefully reduce.
Israeli treatment: what does the section 46 credit actually give you?
It gives you 35% of the donation back as a credit against Israeli tax you owe, not as a deduction from income1. Give 1,000 shekels to a qualifying organisation and 350 shekels come off your Israeli tax bill. The rules that decide whether the credit exists at all are these:
- The floor. Your donations across the tax year, to one institution or twenty, have to reach a cumulative 207 shekels before any credit is given1.
- The ceiling. The credit runs up to the lower of 10,354,816 shekels or 30% of your chargeable income for that year1. Amounts above the ceiling can be carried into the following three tax years, so long as each year's total stays under that year's ceiling1.
- The recipient. Only a public institution holding an approval under section 46 of the Income Tax Ordinance qualifies. You can check any organisation yourself, by name or tax file number, in the Israel Tax Authority's public simulator, which also shows which year the approval is valid for2.
- The claim. Salaried employees can receive the credit in the monthly payslip during the tax year, either automatically where the employer's payroll is connected to the tax authority's donations reporting system, or through a תיאום מס (teum mas) request. Self-employed filers attach the receipts to the דוח שנתי (doch shenati). After the year has closed the route is a השבת מס (hashavat mas) claim1.
Here is the part that catches olim specifically. The credit works against a tax liability1. As an עולה חדש (oleh chadash) inside the ten-year window, your foreign-source income is exempt from Israeli tax3, so it builds no Israeli liability for the credit to reduce. If your income this year is mostly foreign, a large Israeli donation can produce a credit with nothing to bite on.
US treatment: what does your home country allow on its own?
Very little, once the organisation is foreign. Contributions to most foreign organisations are simply not deductible on a US return, and the deduction requires you to itemise rather than take the standard deduction5. Nothing about being a US citizen resident in Israel changes that baseline: your Form 1040 keeps running, and so do the ordinary percentage-of-income ceilings on charitable deductions4.
This is why the US friends-of entity exists. A donation to a US-organised charity that supports work in Israel is, from the IRS side, an ordinary domestic gift5, and from the Israeli side a gift to a foreign body that earns no credit at all.
What does the treaty add, and what does it cost you?
The treaty creates a narrow exception that only Americans get. Publication 526 states that under the US-Israel income tax treaty, a contribution to an Israeli charitable organisation is deductible if and to the extent it would have been treated as a charitable contribution had the organisation been created under US law4. The IRS publishes the treaty text and its technical explanation6.
The price of that exception is a second ceiling. To deduct a gift to an Israeli charity you must have income from sources in Israel, the ordinary limits still apply, and the deduction is additionally limited to 25% of your adjusted gross income from Israeli sources4. So the treaty deduction is not measured against your worldwide income. It is measured against the Israeli slice of it.
Two consequences follow. A US person with no Israeli-source income has no treaty deduction at all, which is exactly the position of an oleh living on foreign investments. And income you exclude from your US return is not in your adjusted gross income, so using the foreign earned income exclusion on your Israeli salary shrinks the very base the 25% limit is measured against. Whether that trade favours you is a question for a cross-border professional, not a rule of thumb.
Which route costs you least for the same gift?
It depends on which tax bill you are actually facing this year, so compare the three routes against a fixed gift of 10,000 shekels, roughly $3,300 at the Bank of Israel representative rate9.
| Route | Israeli credit | US deduction | Substantiation | Net cost of a 10,000 shekel gift |
|---|---|---|---|---|
| Direct to an Israeli institution with section 46 approval | 3,500 shekels, 35% of the gift, against Israeli tax owed1 | Available under the treaty, capped at 25% of your Israeli-source AGI, and only if you itemise4 | Israeli receipt naming you, from an institution whose approval is live for that year; the donation reported into the tax authority system, or the receipts attached to a refund claim1 | 6,500 shekels before any US effect |
| Via a US friends-of entity supporting Israeli work | None. Your receipt is from a US organisation, not a section 46 institution2 | Ordinary domestic deduction against all AGI, subject to the normal ceilings, if you itemise5 | Written acknowledgment from the US organisation, required for any gift of $250 or more4 | 10,000 shekels less your US marginal rate, and nothing at all if you take the standard deduction |
| Direct to a US charity with no Israeli connection | None | Same as the friends-of route: ordinary domestic deduction if you itemise5 | Same written acknowledgment rule4 | Same as above, with no Israeli relief available |
What does this look like with real numbers?
Take a couple who made aliyah three years ago and hold US citizenship. Their Israeli salary income this year is 480,000 shekels, about $160,000. They also net $24,000 from a US rental property, roughly 72,000 shekels, which the ten-year exemption keeps out of the Israeli tax net3 and which the United States taxes normally. They give 36,000 shekels, about $12,000, a year.
What they do now. Some goes to an Israeli school fund whose section 46 status nobody checked, some to a neighbourhood collection with no קבלה (kabala), the rest to the American organisation they supported before aliyah, and they take the US standard deduction. Israeli relief: zero, no qualifying receipt. US relief: zero, no itemising.
Structured. They move 24,000 shekels to Israeli institutions confirmed in the tax authority simulator2, and keep 12,000 shekels going to the American organisation.
- Israeli side. 24,000 shekels clears the 207 shekel floor easily. The ceiling is the lower of 30% of chargeable income, so 144,000 shekels here, or the fixed cap, and neither binds1. The credit is 35%, so 8,400 shekels, about $2,800, comes off a real Israeli tax bill.
- US side. Their Israeli-source AGI is roughly $160,000, so the treaty ceiling on Israeli-charity gifts is about $40,000, far above the $8,000 they gave4. That deduction has cash value only in the years their itemised total beats the standard deduction and they still owe US tax after foreign tax credits, which is most plausible because of the US rental income.
The giving is identical. The difference is 8,400 shekels of recovered Israeli tax, plus a US deduction that is now at least available instead of structurally impossible.
When is a US friends-of entity worth the friction?
When your unrelieved tax bill is the American one rather than the Israeli one. The friends-of route buys a deduction that is not capped by Israeli-source income, and it is the only route that works when you have none4, which describes many olim living on foreign pensions or rentals inside the ten-year window.
The friction is real. You are giving to a separate US organisation that exercises its own control over the funds, so your gift is a gift to it rather than an earmarked payment to an Israeli group, and no Israeli credit attaches to that money. Wanting both reliefs means giving twice and keeping two evidence trails: an Israeli receipt tied to a live section 46 approval2, and a US written acknowledgment for anything of $250 or more4.
What newcomers get wrong
- Cash with no receipt. A donation with no document naming you is invisible to both systems, and so much early giving here is informal that this is where most first-year relief is lost.
- Assuming an Israeli non-profit is automatically approved. Registration as a non-profit and a section 46 approval are different things, and the approval is granted for specified years. Check the organisation, and the year, in the simulator2.
- Assuming a US receipt satisfies Israel. An acknowledgment letter from a US organisation is evidence for a US deduction only, and produces no Israeli credit1.
- Treating the Israeli credit as a refund. It reduces tax you owe1. With little or no Israeli tax liability, which is common early in the ten-year window, the credit has nothing to reduce.
- Expecting the treaty deduction without the two conditions. It requires Israeli-source income and itemising45. Take the standard deduction and the Israeli gift changes your US return by nothing.
- Misreading the carry-forward. The three-year carry-forward is for donation amounts above the ceiling1. It is not a way to bank a credit you could not use because you owed no Israeli tax.
How do you decide the split this year?
Decide by where your taxable income sits, not by where the cause sits, and rerun it each year as your income mix moves through the ten-year window.
- Work out your Israeli chargeable income for the year. Multiply it by 30% to get your Israeli ceiling1. Anything you plan to give below that ceiling can earn the 35% credit, provided the recipient holds a live section 46 approval.
- Work out whether you will owe US tax after foreign tax credits. If the answer is no, and it often is when your only income is Israeli salary, a US deduction is worth nothing this year and the whole gift belongs on the Israeli side.
- If you do owe US tax, check whether you will itemise5. If you will, compare the treaty route, capped at 25% of your Israeli-source AGI4, against the friends-of route, which is uncapped by Israeli source but earns no Israeli credit.
- Fill the Israeli credit first, up to your 30% ceiling, since 35% of the gift is a fixed and immediate return, then route the remainder wherever it reduces a US bill you will genuinely pay.
Check your understanding
You are a US citizen who made aliyah two years ago. All of your income is a foreign pension, which the ten-year exemption keeps out of the Israeli tax net, and you owe US tax on it. You want to support an Israeli organisation. Which route gives you relief?
Set the treaty side up before December
Israel gives individuals a credit of 35% of donations made to public institutions holding a section 46 approval, once the annual total reaches 207 shekels, and up to the lower of 30% of chargeable income or a fixed shekel ceiling. Separately, the US-Israel income tax treaty allows a US taxpayer to deduct a gift to an Israeli charitable organisation if it would have qualified had it been created under US law, but only where the donor has income from sources in Israel, and the deduction is limited to 25% of adjusted gross income from Israeli sources. A gift routed through a US friends-of entity earns the ordinary US deduction against all income and earns no Israeli credit, because the receipt comes from a US organisation. The practical decision for an oleh is where taxable income actually sits this year, because inside the ten-year exemption foreign income creates no Israeli liability for the credit to reduce.
The credit is 35% of the donation for individuals. Your donations across the tax year must reach a cumulative 207 shekels before any credit is given, and the credit runs up to the lower of 30% of your chargeable income or a fixed shekel ceiling, which stands at 10,354,816 shekels for 2026. Amounts above the ceiling can be carried into the next three tax years.
Sometimes, and only because of the treaty. Publication 526 states that under the US-Israel income tax treaty a contribution to an Israeli charitable organisation is deductible if and to the extent it would have been treated as a charitable contribution had the organisation been created under US law. You must have income from sources in Israel, the ordinary limits apply, and the deduction is capped at 25% of your adjusted gross income from Israeli sources.
No. Your receipt comes from a US organisation rather than from an Israeli public institution holding a section 46 approval, so Israel treats it as a gift to a foreign body and gives no credit. The trade is deliberate: you get an ordinary US deduction against all of your adjusted gross income rather than one capped by your Israeli-source income, and you give up the 35% Israeli credit on that money.
Use the Israel Tax Authority simulator, which lets anyone check a public institution by name or by income tax file number and shows which years its section 46 approval is valid for. You can print the confirmation and rely on it for the credit. Being a registered Israeli non-profit is not the same thing as holding the approval, so check the organisation and the year before you set up a standing order.
No. Salaried employees can receive the credit in the monthly payslip during the tax year, either automatically where the employer payroll is connected to the tax authority donations reporting system, or by submitting a teum mas request. If the year has already closed, or the institution did not report your donation in time, the route is a tax refund claim with the receipts attached.
Because the Israeli credit works against Israeli tax you owe, and inside the ten-year window your foreign-source income sits outside the Israeli tax net. If your income this year is mostly a foreign pension, foreign rentals or foreign business income, a large Israeli donation can generate a credit with no liability to reduce, while the same money routed to a US organisation may still shelter US tax you genuinely owe.
Israel wants a receipt naming you from an institution whose section 46 approval is live for that year, ideally reported into the tax authority system by the institution, or attached to your refund claim if it was not. The United States wants a written acknowledgment from the organisation for any gift of $250 or more, and you have to itemise for a charitable deduction to change your return at all.
Not once you stop paying UK tax. Gift Aid donations qualify only so long as they are not more than four times the UK Income Tax or Capital Gains Tax you paid that year, and if a charity reclaims more than you paid, HMRC may ask you to pay the difference. Standing Gift Aid declarations left on old UK direct debits after aliyah can therefore create a bill rather than a benefit, so tell those charities when you stop paying enough UK tax.