Why You Should Pay Zakat ~ 20 Q&A on Zakat
Question #1: Who has to pay zakat?
Answer #1: Zakat is due on the wealth of any Muslim, young or old, male or female, that is held in savings for one calendar year and is more than the Nisab (around 1000 USD).
Example: If both you and your children have separate savings of 1000 dollars or more for one year, you must pay the zakat on both accounts, not just yours. 25$ for your savings, and 25$ for your childs.
Question #2: What forms of wealth are liable for Zakat?
Answer #2: The following wealth is liable for Zakat:
1. Gold & Silver
2. Paper currency held in cash or in the bank.
3. Tradable assets owned by your business.
4. Crops, and herded animals.
Question #3: How do I know when I have to pay zakat?
Answer #3: Look at your balance sheet or estimate your on-hand savings, if it was more than 1000 USD for an entire year at any given month, you must pay Zakat on it.
Example: You see that your bank account shows a balance of 1500 USD from Ramadan of last year until Ramadan of this year. You pay 2.5% on 1500 = $37.50 USD.
Question #4: How can I find out what the Nisab is so I know if I owe Zakat or not?
Answer #4: One of the best websites is called www.e-nisab.com, check the nisab for silver in USD. Today it is 1083 dollars.
For calculating cash, savings, and tradable assets, the Nisab for SILVER is always used, not the one for gold.
Question #5: So now that I know the nisab (1083 dollars) and I know that I’ve had saving for a year more than that amount, how do I calculate my Zakat.
Answer #5: Follow these steps
- You take your current savings, all cash in hand, any tradable business inventory you have, and the value of any active investments you have and add them together. Let’s say that gives you 10,000 USD.
- Deduct any immediate liabilities such as this month’s mortgage payment, your other bills, payroll (if you have a business), insurance payments, etc. Let’s say that equals 3,000 USD.
- Subtract your immediate liabilities from your current assets, 10,000 – 3,000 = 7,000 USD.
- Calculate zakat: 2.5% x 7,000 USD = 175.00 USD is due for Zakat.
Question #6: Someone owes me money, do I have to pay Zakat on that amount?
Answer #6: If you can collect at any time (i.e. it is “good debt”) then yes you must calculate that into your zakat as above. If they are refusing to pay (i.e. it is “bad debt”) or are they are unable to pay you because of financial distress, then no you do not pay it at this time.
Question #7: What do I do once I collect that debt?
If it is more that the Nisab and has been owed for more than a year, you pay zakat for one year only once you collect.
If it is less than the nisab, then you add that money to your savings and what for the next time you pay zakat.
Question #8: Do I have to pay Zakat on my 401k plan or my IRA?
Answer #8: You do not pay Zakat on your 401k, your IRA, or any account to which you do not have access until you cash out without penalty. At that time you pay Zakat for one year.
Question #9: Do I have to pay zakat on my personal assets such as my home and car? What about my capital assets like my copier machine, offices, company car, etc.?
Answer #9: You do not have to pay Zakat on any personal assets or capital assets. Zakat is only due on surplus wealth that is over the Nisab for a year or more.
Question #10: Who can I pay my Zakat to?
Answer #10: Zakat is to be given to eight categories of people designated in the Surah 9:60:
(1) The destitute, (2) The poor, (3) those collecting and distributing zakat, (4) those whose hearts need softening, (5) in manumission, (6) in paying off debts, (7) in God’s path, (8) and helping the travelling who are stranded.
Question #11: Can a man pay his zakat to his wife? Can a wife pay her zakat to her husband? What about the rest of my relatives.
Answer #11: A man cannot pay zakat to his wife, because he is obligated to provide for your wife; anyone you are obligated to maintain financially then you may not give them your zakat. This includes your wife, your children, and your parents. Your siblings, cousins, Uncles and aunts can receive your zakat. Your wife however is not obligated to maintain you financially, she may give your from her zakat ONLY if you are needy and included in one of the above eight categories.
Question #12: Instead of paying my zakat here in the United States, can I send my zakat overseas?
Answer #12: You may not send your zakat anywhere outside your locality until you are certain that there is absolutely no need for it. You are obligated to give back to the locality you live in before you take that money elsewhere. The only exception to this is if you are sending money to your family members.
Question #13: I have Gold and silver jewelry, do I have to pay Zakat on it?
Answer #13: Yes, you must pay zakat on it, regardless of whether it is for adornment/decoration, you wear it or not, or if it was inherited. ANY gold or silver you have, if it more than nisab, Zakat must be paid on it.
Question #14: What is the Nisab for Gold and Silver?
Answer #14: If you have 95 grams of gold or more, then you are liable to pay Zakat on that gold. If you have 595 grams of silver or more, then you are liable to pay Zakat on that silver. Check www.e-nisab.com for the cash value of the nisab.
Question #15: I know that my earnings and savings will be the same for the next couple of years, can I pay my zakat for next in advance?
Answer #15: Yes, you may pay your zakat for next year in advance along with this year. However, if your earnings and savings change so that you owe more, you will have to pay the difference later.
Question #16: I did not pay Zakat for years, What do I do now?
Answer #16: You should look back to your balance statements and estimate your liability for the past years, then pay for those years.
Question #17: I want to give my Zakat to the Islamic center, what should I do?
Answer #17: You should write a check and specify on that check “General Zakat” or “Zakat al-Fitr”.
Question #18: Can I give zakat for the building, for toilets, etc?
Answer #18: Zakat is only to be used for the eight categories listed above. All other projects should be paid for from generous donations not associated with Zakat.
Question #19: What is Zakat al Fitr?
Answer #19: Zakat al Fitr is an expiation for the sins and mistakes we commit during Ramadan. It is paid as 2.5 kilos or 5 pounds of wheat, dates, rice, etc. You may pay the cash value of rice if you like. The cash value this year $10.00 is per person. The Islamic center will act as your agent in distributing to the poor.
Question #20: I want to pay for Zakat al Fitr. Can I write a check to the Islamic Center? How much do I pay?
Answer #20: Yes, write a check and specify “Zakat al-Fitr”. You must pay for every member of your family. We will announce when we will begin to collect zakat al fitr.
Example: You, your spouse, and 3 children make 5 people. Multiply 5 x 10.00 = 50.00 zakat al fitr.
ZAKAT Calculator: http://soundvision.com/Info/life/zakatcalc.asp