ZAKAT Q&A
Zakat: The Third Pillar of Islam
Introduction with answers to 15 frequently asked questions
One of the most important principles of Islam is that all things belong to God, and human beings hold wealth in trust. The word Zakat means both ‘purification’ and ‘growth.’ Our possessions are purified by setting aside a portion for those in need, and like the pruning of plants, this cuts back balances and encourages new growth. Muslims calculate their Zakat individually. For most purposes, this involves the payment each year of 2.5% of one’s Zakatable wealth.
Those who are pious may also give ‘Sadaqah,’ which is another form of charity. Sadaqah is preferably given in secret. Although this word can be translated as ‘voluntary charity,’ it has a broader meaning. The Prophet ﷺ said, “Even greeting your brother or sister with a smile and cheerful face is charity.”
The Prophet ﷺ also said, “Charity is a necessity for every Muslim.” He was asked: ‘What if a person has nothing?’ The Prophet ﷺ replied, “He should work with his own hands for his benefit and then give something out of such earnings in charity.” The Companions asked: ‘What if he is not able to work?’ The Prophet ﷺ said, “He should help the poor and needy.” The Companions further asked, ‘What if he cannot do even that?’ The Prophet ﷺ said, “He should urge others to do good.” The Companions asked, ‘What if he lacks that also?’ The Prophet ﷺ said, “He should restrain himself from doing evil, that is also charity.”
Zakat is the third pillar of Islam. This graceful charitable giving represents the unbreakable bond between members of the Muslim community, whom Prophet Muhammad ﷺ described to be “like the organs of the body, such that if one [organ] suffers then, the others rally in response.” The Mosque Foundation helps thousands of Muslims fulfill this important pillar of Islam every year. These Zakat contributions help many needy families.
Here you will find quick answers to frequently asked questions about Zakat. If you want further explanations, we invite you to speak to an Imam. To calculate your Zakat, use our convenient Zakat Calculator. Both the calculator and answers to the questions are based on respected Fiqh references. They are also reviewed and approved by Muslim scholars.
What is Zakat?
Zakat does not refer to charitable giving out of kindness or generosity, but to the systematic giving of 2.5% of one’s Zakatable wealth each year to benefit those who are financially less advantaged. This rate applies to cash, gold, silver, and commercial assets. By giving this small portion of one’s wealth, Muslims purify their wealth and please the Creator. Zakat is the third of five pillars of Islam, which means it is an essential act of worship that Muslims must fulfill.
Who pays Zakat?
All Muslims who meet the financial threshold of Zakat, as indicated in Nisab—(see below), are required to give a portion of their wealth annually—to help those in need.
How much Zakat is due?
Zakat is calculated based on the net assets one possesses at the end of one year. To calculate how much Zakat you owe, the Mosque Foundation created a convenient Zakat calculator found here.
When is Zakat due?
Zakat is due after one Lunar (Hijri) year starting from either the first day you acquired the amount of Nisab or the day you paid your Zakat the previous year. Most Muslims give their Zakat during Ramadan when Allah magnifies the rewards of good deeds. Zakat becomes a religious obligation upon a Muslim after a period of one lunar year passing while he or she owns the Nisab. And if you always possess the minimum Nisab value, then Zakat is due once every lunar year at a date of your choosing.
What is ‘Nisab’?
Nisab is a minimum amount of wealth you must own for a full Lunar year to be liable to pay Zakat. It is estimated at 3 ounces of pure gold. The current Nisab value is $15,200. Nisab is the minimum threshold of wealth a Muslim holds to pay Zakat.
If I don’t keep track of whether or not I own Nisab for an entire year, what should I do?
Since most Muslims in the USA own at least the value of Nisab, you don’t have to keep track of when you acquired this amount. Also, since you are encouraged to give in charity more than the minimum obligatory Zakat, you should assume that you have always owned the Nisab value. Therefore, to simplify matters, choose a specific date of the lunar calendar every year, such as the 25th of Ramadan, calculate the total value of your Zakatable wealth on that date, and give 2.5% of it or the rate that applies to the type of wealth you own.
Do I have to possess the amount of Zakatable wealth for a complete Lunar year before I have to pay Zakat on it?
No. You must only possess the value of Nisab for the whole year. Therefore, as long as you have a minimum amount of Nisab for the year, you assess your Zakatable wealth on your Zakat due date, regardless of when you acquired this wealth or part of it.
How does the Mosque Foundation distribute Zakat?
The Mosque Foundation distributes Zakat to vulnerable neighbors in the Chicago area to fulfill their essential needs.
What is Zakat-ul-Fitr?
Zakat-ul-Fitr, also known as Fitrah, is the obligatory charity paid by all Muslims throughout Ramadan. It is also called Sadaqat-al-Fitr, or Zakat-al-Fitrah. Zakat-ul-Fitr is currently the equivalent of $15 per household member.
What is the difference between Zakat and Sadaqah?
In the language of the Quran, Zakat and Sadaqah are similar. But in practice, Sadaqah is the term used to indicate voluntary charitable giving to both Muslims and non-Muslims in any amount. Zakat, on the other hand, is mandatory, with a fixed minimum rate, usually given to Muslims in need.
What is Zakatable wealth?
Zakatable wealth is what you own, whether in your possession or with others, except for the properties and belongings you use, such as your house, car, clothes, and business equipment. Also, Zakatable wealth is what remains with you after meeting the needs and expenses of yourself and your family. It is not based on the income you make during the year. Instead, it is based on what remains with you after you take care of your family’s expenses. This wealth can be in the form of cash, gold, stocks, business commodities, or other wealth.
How does the Mosque Foundation Zakat calculator work?
The Mosque Foundation provides a Zakat calculator covering the most common Zakatable assets for people living in America. This calculator is based on respected Fiqh references and reviewed by Muslim scholars. However, it does not cover every Zakatable item, so please consult with Muslim scholars for items not mentioned. We encourage you to calculate your Zakat using our calculator and to pay it online so that we may disperse it to qualified recipients.
If I loan a friend money, and it is due in six months, do I have to pay Zakat on this loan?
Although the amount of the loan is not yet in your possession, you still own it. So you have to pay Zakat on it if you expect it back (good loan). However, if the loan is due and you asked for it, and the borrower can’t pay you back (bad loan), you are not required to pay Zakat on it until it is in your possession. Once you receive it, you pay Zakat on it for one year only.
How much Zakat do I have to pay on behalf of my business?
You do not pay Zakat on your equipment, such as refrigerators, cashier devices, and other equipment and tools. Even if you own the business property, you don’t pay Zakat on it. However, you must pay Zakat on the wholesale price of all inventories and other Zakatable assets such as business cash balance, as mentioned in the Zakat calculator worksheet.
How do I pay Zakat on my service-providing company?
There is no Zakat due on the value of the equipment if it is used for business. But if you own this company, you should combine your Zakatable wealth with that of the company. The Zakat is payable on what you hold in Zakatable wealth after a full year of meeting your expenses and those of the company.
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