Last Updated 2 weeks ago

Charitable giving should be simple. You give to a cause you care about, the charity benefits, and if the rules are followed, you may receive a tax benefit.

But tax law has a way of making even generosity painfully technical.

That is exactly what happened in the Martin v. Commissioner cases*. Two cousins donated land to a local municipality. The gift was real. The property was transferred. The value was appraised at $665,000. They filed the relevant forms.

But they were missing one crucial piece: the right written acknowledgment from the charity.

As a result, the IRS disallowed the entire deduction.

Not part of it. Not a reduced amount. The entire thing.

For Americans living in Israel, this case is more than a tax story. It is a warning. Whether you donate to Israeli charities, U.S. charities, “Friends of” organizations, donor-advised funds, or give appreciated stock, the paperwork is not a side issue. It can determine whether the deduction survives.

Key Points

• The IRS requires a proper written acknowledgment for charitable contributions of $250 or more. Without it, you may be denied the deduction even if the donation was real.
• For U.S. tax purposes, the acknowledgment must generally be in your possession before you file the return.
• Israel’s Section 46 system is becoming more digital, but that does not replace U.S. documentation requirements for Americans in Israel.
• The U.S.-Israel tax treaty can allow certain cross-border charitable deductions, but the rules depend on the type of charity and the source of your income.
• Donating appreciated assets, using QCDs, or contributing to donor-advised funds can be powerful, but only if you handle documentation correctly.

The Martin Case: A Real Donation, But No Deduction

The Martin cousins donated a parcel of land to Highland City, Utah. The land was appraised at $665,000, and the donation was genuine. Nobody claimed the transfer was fake.

That is what makes the case so frustrating.

The problem was not the donation. It was the receipt.

For charitable contributions of $250 or more, the IRS requires a contemporaneous written acknowledgment from the charity. Among other things, that acknowledgment must state whether the donor received any goods or services in exchange for the donation.

The Martins had documents. They had a deed. They had appraisal work. They filed Form 8283.

But the documents did not properly state that no goods or services were received in exchange for the gift. That missing sentence was enough to sink the deduction.

In this area of tax law, “close enough” is rarely enough. A donation can be real, generous, and valuable, and still fail for tax purposes.

Painful? Yes.

Preventable? Also yes.

The Receipt Rule: No Wiggle Room

For U.S. taxpayers, charitable deductions are not based only on whether money or property changed hands. They are based on proving that the donation meets the tax rules.

For any single contribution of $250 or more, you need a contemporaneous written acknowledgment from the charity.

That acknowledgment should usually include:

• The amount of cash donated, or a description of non-cash property donated.
• A statement saying whether the charity provided goods or services in exchange for the donation.
• If goods or services were provided, a description and good-faith estimate of their value.

If only intangible religious benefits were provided, the acknowledgment should say that.

This is where many donors get into trouble. They assume that a thank-you letter, bank transfer confirmation, credit card receipt, or property deed is enough.

Sometimes it is not.

For Americans in Israel, this can be especially tricky because many Israeli charities provide receipts designed for Israeli tax purposes. Those receipts may be perfectly fine in Israel. That doesn’t automatically mean they satisfy U.S. tax rules.

If you are claiming a U.S. charitable deduction, the receipt needs to work for the IRS.

The Timing Trap: You Need the Receipt Before Filing

The word “contemporaneous” sounds like tax jargon, but it has a very practical meaning.

You need the proper acknowledgment before you file your tax return, or by the due date, including extensions, whichever comes first.

That last part matters.

Let’s say you made a large donation in 2025. Your return was due April 15, 2026, but you can extend it until October 15, 2026. If you file on April 15 without the receipt and receive the receipt in June, you may have a problem. You did not have the acknowledgment when you filed.

The safer move, if the paperwork is missing, is often to extend the return and wait until you have the acknowledgment before filing.

This is not about delaying for no reason. It is about preserving the deduction.

Israel’s Section 46 System Is Getting Easier. The U.S. Is Not.

Israel has its own charitable giving rules. Many Israeli taxpayers are familiar with Section 46, which allows a tax credit for donations to approved Israeli public institutions.

In Israel, the system has been moving toward digital reporting. Approved charities can report donations directly through the Israel Tax Authority’s system, reducing the old paper-receipt headache.

That is helpful.

But Americans in Israel need to be careful. Israeli tax administration and U.S. tax administration are not the same thing.

Just because a donation appears in the Israeli system doesn’t automatically mean you have the right documentation for your U.S. return. If you are a U.S. citizen or U.S. tax resident claiming a U.S. deduction, you still need to meet U.S. substantiation rules.

The Israeli system may help you for Israeli purposes. It doesn’t replace the IRS rules.

The U.S.-Israel Treaty: Helpful, But Limited

One of the more unusual features of the U.S.-Israel tax relationship is the charitable contribution provision.

In broad terms, the treaty may allow a U.S. citizen or resident to claim a charitable deduction for donations to certain qualifying Israeli charities, if the donation would have qualified had the organization been created under U.S. law.

That is a major benefit.

But it is not unlimited.

For U.S. tax purposes, the deduction for qualifying Israeli charitable contributions generally depends on income from Israeli sources. In plain English, the source of income matters.

If you are an American living in Israel and most of your income is Israeli-source salary or self-employment income, donations to qualifying Israeli charities may be more useful for U.S. tax purposes than many people realize.

If most of your income is U.S.-source dividends, U.S. rental income, or other U.S.-source income, the analysis may be different.

This is why charitable planning for Americans in Israel should not be done casually. The same donation can produce different results depending on where your income comes from, where the charity is organized, and whether the organization qualifies under the relevant rules.

Israeli Charity or U.S. “Friends Of” Organization?

Many Israeli nonprofits also have a U.S. “Friends of” organization. That can help U.S. donors, especially if the U.S. entity is a qualified U.S. charity.

But it is not always the best choice.

A donation to an Israeli Section 46 organization may help on your Israeli return. It may also potentially help on your U.S. return under the treaty, subject to limitations.

A donation to a U.S. “Friends of” organization may be cleaner for a U.S. charitable deduction, but it may not produce the same Israeli tax credit.

There is no universal answer.

The right choice depends on your income, residency, the charity, your tax bracket, whether you itemize deductions in the U.S., and how much you are giving.

Donating Appreciated Stock Can Be Better Than Donating Cash

For high earners, founders, executives, and investors, charitable giving can be much more powerful when it involves appreciated assets.

If you bought stock years ago and it has gone up significantly, selling it may trigger capital gains tax. Donating the stock directly to a qualified charity may allow you to avoid recognizing the gain and potentially receive a deduction based on the fair market value of the shares.

That can be a double benefit.

You avoid the capital gains tax that would have applied on a sale, and you may receive a charitable deduction for the value of the asset.

But the larger the gift, the more careful you need to be. You need to confirm that the charity can accept the asset, understand U.S. and Israeli treatment, check whether an appraisal is required, and make sure you receive the right acknowledgment.

DAFs and QCDs: Useful, But Technical

A donor-advised fund, or DAF, can be an excellent planning tool. You contribute money or assets to the DAF, potentially receive a charitable deduction in the year of contribution, and then recommend grants to charities later.

This can be especially useful in a high-income year when you know you want to give but haven’t yet decided which charities should receive the funds.

But once you contribute assets to a DAF, those assets no longer belong to you. The sponsoring organization has legal control. You can recommend grants, but you no longer legally own the money.

For retirees with IRAs, a qualified charitable distribution, or QCD, can also be powerful. A QCD allows eligible IRA owners to transfer funds directly from the IRA to a qualified charity. If done correctly, the distribution can be excluded from taxable income and may count toward required minimum distributions.

But QCDs have strict rules. The money must go directly from the IRA custodian to the charity. If the funds hit your personal bank account first, you may have converted the transaction into a taxable distribution.

Also, QCDs generally cannot be made to donor-advised funds. That surprises people.

So if you are retired, living in Israel, and thinking about charitable giving from an IRA, do not just transfer money and hope for the best. Confirm the charity is eligible, confirm the transfer is direct, and confirm that the custodian processes it correctly.

The Big Lesson: Your Donation Has Two Lives

Every charitable gift has two lives.

The first life is the real-world gift. The charity receives money, land, stock, or other property. The cause is supported. Something good happens.

The second life is the tax life. The IRS, the Israel Tax Authority, or both look at the documentation and decide whether the gift qualifies for tax benefits.

The Martin cousins succeeded in the first life. They failed in the second.

That is the lesson.

Good intentions do not create tax deductions. Properly documented gifts do.

Final Thoughts

Charitable giving is one of the best parts of tax planning. It allows families to support causes they care about, build a legacy, and sometimes reduce taxes in the process.

But charitable deductions are not automatic. For Americans in Israel, the rules can be especially technical because U.S. and Israeli systems overlap but don’t always match.

The Martin case is the perfect reminder. A $665,000 donation can be real and still fail because the paperwork was not right.

If you are making meaningful charitable gifts, do not treat receipts, acknowledgments, appraisals, DAF rules, QCD rules, or treaty limits as afterthoughts. They are the foundation of the deduction.

At Philip Stein & Associates, we help Americans in Israel think through both sides of their tax life. If you are planning a significant donation, speak with us before the transaction is completed.

Your generosity deserves better than a denied deduction.

FAQ About Charitable Giving for Americans in Israel

Do I need a receipt for every charitable donation?

You don’t necessarily need the same level of documentation for every charitable donation, but for U.S. tax purposes, donations of $250 or more generally require a contemporaneous written acknowledgment from the charity.

Can I deduct donations to Israeli charities on my U.S. tax return?

You may be able to deduct donations to certain qualifying Israeli charities on your U.S. tax return under the U.S.-Israel tax treaty, subject to specific requirements and limitations.

Does an Israeli Section 46 receipt satisfy the IRS?

An Israeli Section 46 receipt may be enough for Israeli tax purposes, but it does not automatically satisfy the IRS.

If you are claiming a U.S. deduction, the acknowledgment must meet U.S. requirements, including the required language about whether goods or services were provided in exchange for the donation.

Is it better to donate cash or appreciated stock?

Donating appreciated stock may be better if the stock has increased significantly in value and you structure the donation correctly.

A direct donation of appreciated stock may allow you to avoid capital gains tax and potentially receive a deduction based on fair market value.

*Zollars, E., CPA. (2026, May 14). Strict Compliance with Contemporaneous Written Acknowledgment Requirements in Charitable Land Contributions — Current Federal Tax Developments. Current Federal Tax Developments. https://www.currentfederaltaxdevelopments.com/blog/2026/5/14/strict-compliance-with-contemporaneous-written-acknowledgment-requirements-in-charitable-land-contributions