Calculating Your Zakat
What basic factors go into calculating your Zakat payments?
Make five assessments about your wealth to determine your Zakat payment:
Type of wealth
Wealth ownership
Zakat threshold for each wealth-type
Zakat timeframe for each wealth-type
Zakat rate for each wealth-type
What types of wealth do you pay Zakat on?
You owe Zakat on five wealth-types:
Personal
Business (trade goods and exploited assets)
Agricultural Produce (irrigated and non-irrigated crops)
Livestock
Discovered or Prospected Treasures (windfalls and natural resoures)
You can read more about Zakatable wealth-types in Is Zakat Due on All Wealth? And in What Requirements Qualify Wealth for Zakat?
How does wealth ownership impact Zakat payments?
You pay Zakat only on the eligible wealth that you exclusively own. Our scholars called this condition of Zakat absolute ownership. It means you have the right as an individual to possess and control the property to the exclusion of all others. You can exchange it for another asset or dispose of it without anyone else’s permission.
The reason for this requirement is that you will transfer your Zakat into the sole ownership of another person from the eight categories of individuals that Allah has made exclusively eligible to receive Zakat. (See Surat Al-Tawbah, 9:60 for these categories).
You can read more about this in the two articles noted in the previous question.
How do I know the wealth threshold for Zakat payments?
The Prophet, on him be peace, set the Zakat threshold – called nisab – for each wealth-type. It is called nisab because this Arabic word means ‘origin,’ as it marks the minimum amount of accumulation in your Zakat-eligible wealth where your right on a portion of the wealth Allah, its true Owner, has given you ends and the right of the poor, the destitute, and the other six categories (eight total classes of people) begins in your wealth, as a Muslim, as declared by Allah.
That is why it is called Zakat Al-Mal, or The Obligatory Alms on Wealth.
How do I know the wealth threshold for Zakat payments?
The Prophet, on him be peace, set the Zakat threshold – called nisab – for each wealth-type. The nisab value for your personal, business, and discovered wealth is the current worth of 85 grams of pure gold (approx. 3 U.S. ounces; remember, market gold is measured by the troy ounce not the U.S. apothecary ounce).
If you own other types of Zakatable wealth, you can read about their nisab limits in Zakat Conditions and Calculations. (Click the margin plus signs next to each question or line item to display its content.)
For a more detailed explanation of nisab see What Is Nisab in Islam?
For a more comprehensive explanation for the money bases for our Zakat calculations regarding our weights and measures of wealth today are the same as what the Prophet, on him be peace, established see How Is Zakat Calculated on Wealth?
How do I determine the timeframe to measure my wealth in and the dates to make my Zakat payments on?
Zakat on most Zakatable wealth comes due when it reaches nisab after the passage of an Islamic lunar year. The Islamic year is called the Hijri year and its period for the purposes of determining Zakat payment is called a hawl.
One calculates a hawl (Zakat year) from whatever date one’s Zakat-eligible wealth reaches the “minimum threshold” of nisab for that type of wealth until an entire 12 hijri months pass (which is about 354 days, roughly 11 short of the solar year). That final day becomes a payer’s Zakat Due Date (ZDD)
Do changes in nisab change when Zakat comes due?
The strongest ruling here, among our four most prominent Schools of Islamic Law (madhahib) is that of the Hanafi school. It states that fluctuations of Zakatable wealth below nisab at any time after one’s wealth reaches that nisab limit do not alter one’s Zakat calendar, so long as one has the nisab amount at the beginning of the Zakat year (hawl) and also has the nisab for that wealth type on its original due date (ZDD).
The other three legal schools (Maliki, Shafi‘i, and Hanbali) disagree. They variously hold that if wealth dips below the nisab threshold in the course of the year, one restarts the Zakat year count (hawl). They say that when wealth during the Zakat year falls below nisab the hawl count restarts when that wealth-type again reaches the nisab limit.
You can read more about this in When Is Zakat Due?
There are times when Zakat comes due upon receipt of a wealth-type that comes to you in a lump sum or harvest. You can read Do You Pay Zakat on Income or Savings?
How much should I pay on Zakat?
The Prophet, on him be peace, set the Zakat rate for each wealth-type on which Zakat comes due.
He fixed the Zakat rates for personal wealth and business wealth at 2.5 percent each. If you own trade goods, wares that change hands, you assess them at their current wholesale value.
If you own business assets that you exploit and that remain as capital, like rental property and machines, you pay no Zakat on them. But you do pay Zakat on the wealth they generate for you as net income. This is added to all other sources of money, like cash, gold, savings, stocks, etc. to determine if you are in possession of nisab.
However, the rate of Zakat on rental property, according to the stronger opinion, comes due at a rate of either 5% or 10% (most the latter rate) based on an analogy with irrigated and unirrigated crop harvests. (See Is Zakat Owed on Rental Property?)
The Prophet, on him be peace, fixed the Zakat rate on irrigated crops at 5 percent upon harvest, and for non-irrigated crops at 10 percent on harvest.
He fixed the Zakat rate on all types of treasure troves at 20 percent, due on extraction.
For nisab and zakat calculation formulas, see Nisab and Zakat Calculation in a Nutshell.
For a more comprehensive explanation for the money bases for our Zakat calculations regarding our weights and measures of wealth today being the same as what the Prophet, on him be peace, established, see How Is Zakat Calculated on Wealth?