How to Calculate Zakat on Savings, Gold, and Investments: A Step-by-Step Guide
UMMA Farm Team
Understanding Zakat Calculation
Zakat is one of the five pillars of Islam — a mandatory act of worship that purifies your wealth and supports those in need. But many Muslims find the calculation process confusing. This guide breaks it down step by step.
The Prophet Muhammad (peace be upon him) said: "Whoever pays the zakat on his wealth will have its evil removed from him." (Ibn Khuzaimah)
The Nisab Threshold: Do You Owe Zakat?
You only owe zakat if your total zakatable wealth exceeds the nisab — the minimum threshold. There are two standards:
- Gold nisab: 87.48 grams of gold (approximately $6,500–$7,500 in 2026)
- Silver nisab: 612.36 grams of silver (approximately $450–$550 in 2026)
Most scholars recommend using the silver nisab as it's lower and ensures more people fulfill their obligation. If your net zakatable assets exceed this amount and you've held them for one full lunar year, you owe 2.5%.
Zakat on Cash and Savings
This is the simplest calculation. Add up all cash in your:
- Bank accounts (checking, savings, money market)
- Cash on hand
- Digital wallets (Venmo, PayPal, etc.)
Example: You have $15,000 in savings + $2,000 in checking + $500 cash = $17,500. Zakat = $17,500 × 2.5% = $437.50
Zakat on Gold and Silver
All gold and silver you own is zakatable — jewelry, coins, bars, regardless of whether you wear it (according to most scholars).
- Weigh your gold/silver in grams
- Multiply by the current market price per gram
- Apply the 2.5% rate
Example: You own 100g of gold at $75/gram = $7,500. Zakat = $7,500 × 2.5% = $187.50
Zakat on Stocks and Investments
For stocks held as investments (not day-trading):
- Option 1: Pay 2.5% on the total current market value of your portfolio
- Option 2: Pay 2.5% on only the zakatable assets of each company (cash + receivables − liabilities) proportional to your ownership
Most scholars recommend Option 1 for simplicity. Retirement accounts (401k, IRA) — scholars differ, but many say zakat is due on the accessible balance.
Zakat on Business Assets
For business owners: calculate zakat on your trade inventory (items held for sale) + cash + receivables − debts owed. Fixed assets like equipment and property used for business are not zakatable.
Where to Give Your Zakat
The Quran specifies eight categories of zakat recipients (Surah At-Tawbah, 9:60). UMMA Farm campaigns qualify because they directly support food production and distribution to families in need — falling under the categories of the poor and the needy.
When you give your zakat to UMMA Farm, it doesn't just feed a family once — it funds a self-sustaining agricultural system that produces food year after year. That's zakat working as sadaqah jariyah.