In the spirit of Purim, we’re taking a deeper dive into an often overlooked but essential aspect of financial planning—giving. In this guide, we’ll explore how to maximize the impact of your donations, practical tips for optimizing tax benefits, and a clear breakdown of Israel’s new tax credit system for charitable contributions.

Making a bigger impact with your donations

For those who prioritize giving Tzedakah each year, the main concern is often ensuring donations create a meaningful impact. How can you be confident that your contributions support the causes you truly value? Here are some practical ways to identify and evaluate organizations that align with your priorities:

• Seek recommendations from friends & family – Start by looking into organizations that have directly helped or impacted the people you care about. Personal experiences can provide valuable insight into an organization’s effectiveness.
• Jgive categories – Using Jgive’s explore feature, you can sort for causes based on specific categories that are important to you.
• Maximum Impact – A relatively new project of Effective Altruism Israel is seeking to evaluate nonprofits for efficiency and cost effectiveness. Each year they evaluate different organizations and choose Excellence Awards based on certain criteria.

We are happy to add other ideas to this list if they can be helpful to others. Feel free to share your ideas/resources with us.

Maximizing your tax benefit

One of the great benefits of giving Tzedakah is that it can also help you reduce your tax bill. This means that instead of the government deciding where your tax shekels go, more of your income can be directed toward the causes you personally care about.

But how does this actually work?

Section 46 (סעיף 46)

This is a section of the Israeli income tax code and the term used to define a publicly registered non-profit. Donating to a non-profit registered under סעיף 46 entitles you to Israeli tax benefits. To verify that an organization is registered properly, you can always request a certificate of registration from the organization (אישור מוסד ציבורי שקיבל אישור לפי סעיף 46) and/or search the governments database.

What is a tax credit?

A tax credit is a shekel-for-shekel reduction in the amount of tax you owe. In simple terms, the more tax credits you accumulate, the less tax you pay.

For every 100 NIS that you donate to a registered charity, you receive a 35 NIS tax credit (35%). This assumes you donate at least 207 NIS or more in 2025. There are also limits to the credits you can earn for those donating millions of NIS or more than 30% of your taxable income. If donations exceed the limit in a given year, the excess amount can be carried forward and claimed for tax relief in the subsequent three years.

3 ways of claiming your tax credits (new!)

Under the new digital donation system introduced by the Israel Tax Authority, there are now three main ways to access the donation tax credits you are entitled to:

1. Automatic tax credit via payroll (For Employees)

• Many nonprofits are now using the new system for issuing receipts that is directly integrated with the tax authority. By 2026 all non-profits will be required to do so.
• If your employer is part of the new payroll integration system (currently in a pilot phase), your donation details will be automatically transferred to your employer’s payroll system. This system is expected to be integrated with all payroll software in Israel at some point this year.
• This allows you to receive the tax credit directly in your paycheck, without needing to do anything.

2. Doing a Teum Mas (tax coordination)

• You can upload your donation receipts to the Teum Mas system online and receive a page instructing your employer to provide a tax credit in your next paycheck. This can only be done during the tax year in which the donation was given.
• All donation receipts issued by approved Section 46 nonprofits will soon be stored digitally in your personal account on the Israel Tax Authority website – removing the need for you to manually upload them.
• Once complete, you can then bring your submitted Teum Mas to your employer/HR department to receive the appropriate adjustment in your next paycheck.

3. Claiming tax credits through an annual tax return

If you are a business owner or someone who submits an annual tax return for other reasons, you will still be able to manually claim the tax credit for your donations. This is also the only option for those looking to claim tax credits for previous tax years. The new system that stores donation receipts digitally will make this easier for you and/or your accountant.

The platform Alfie is a great way to submit a tax return on your own.

Gifting appreciated assets for double tax savings

When you donate an asset that has increased in value you kill two major tax birds with one stone:

1. The 35% tax credit – just like any other donation, you get a tax credit based on the value of the asset at the time you donate it.
2. When you donate an asset you avoid all the income tax you would have had to pay had you sold it. For a simple example, let’s say you wanted to donate a stock that you bought for ₪100 that is now worth ₪200. Had you sold it you would owe ₪25 in tax (25% of the ₪100 capital gain). By donating it instead, you avoid the ₪25 tax and get a ₪70 tax credit for a double tax benefit.

Some Israeli organizations are set up to receive gifted stock directly, but most aren’t. This is where a donor advised fund (DAF) can be especially useful. By donating assets directly to a DAF you can get all the tax benefits immediately and then decide which charities you want to receive the proceeds in the future.

Two non-profits in Israel that offer DAFs where you can donate both cash and appreciated assets (including shares, real estate, and art) are:

• JGive – 50K NIS minimum to open an account
• Keshet – 100K NIS minimum to open an account

What about donating to organizations outside of Israel?

The best solution is to find an Israeli Seif 46 charity that can receive your donation and forward it to the charity outside of Israel. For example, Maximum Impact allows you to donate to GiveWell, Against Malaria Foundation, GiveDirectly, and others.

If on the other hand you give directly to a foreign charity, you can only earn Israeli tax credits if you also have taxable income in that country. However, since the rules around this are complex and depend on specific tax treaties between Israel and other countries, it is best to consult with an Israeli accountant to determine if this is a viable and beneficial option for your situation.