Zakat: What It Is, How to Calculate It, and Where Your Zakat Makes the Most Impact

Zakat: The Third Pillar of Islam

Zakat (زكاة) is the obligatory annual charity in Islam, required of every Muslim whose wealth exceeds a minimum threshold called the nisab. It is not optional generosity — it is a fundamental pillar of the faith, equal in importance to prayer and fasting.

The word "Zakat" comes from the Arabic root meaning "to purify." By giving Zakat, Muslims purify their wealth and acknowledge that everything they have ultimately belongs to Allah.

Zakat is typically calculated at 2.5% of qualifying wealth held for one full lunar year. But the details of what qualifies, how to calculate it, and where to direct it matter significantly.

How to Calculate Zakat

Zakat is due when your net qualifying assets exceed the nisab threshold for one full lunar year. Here's how to calculate it:

Step 1: Determine the Nisab

The nisab is the minimum amount of wealth a Muslim must possess before Zakat becomes obligatory. It's based on the value of either:

• Gold: 87.48 grams (approximately $5,000-$6,000 USD depending on gold prices)
• Silver: 612.36 grams (approximately $400-$500 USD)

Most scholars recommend using the silver standard to ensure more people fulfill their obligation.

Step 2: Calculate Qualifying Assets

• Cash and bank balances
• Gold and silver (jewelry included, per most scholars)
• Investment assets (stocks, mutual funds, retirement accounts)
• Business inventory and receivables
• Rental income properties (net value or income, depending on school)

Step 3: Subtract Liabilities

Deduct immediate debts, due expenses, and necessary living costs.

Step 4: Apply 2.5%

If Net Assets > Nisab, then: Zakat = Net Qualifying Assets × 2.5%

Who Is Eligible to Receive Zakat?

The Quran specifies eight categories of Zakat recipients (Surah At-Tawbah 9:60):

• Al-Fuqara (The Poor) — Those who cannot meet basic needs
• Al-Masakin (The Needy) — Those who have some income but not enough
• Amil Zakah (Zakat Administrators) — Those who collect and distribute Zakat
• Muallaf (New Muslims) — Those whose hearts are to be reconciled
• Ar-Riqab (Freeing Captives) — Those in bondage or slavery
• Al-Gharimin (Debtors) — Those overwhelmed by debt
• Fi Sabilillah (In the Cause of Allah) — Broadly interpreted to include charitable causes
• Ibn As-Sabil (Travelers) — Those stranded or in need during travel

The most impactful Zakat distribution addresses root causes of poverty — not just symptoms. Feeding a family today is necessary. Building a system that feeds families permanently is transformational.

Making Your Zakat Create Lasting Impact

When choosing where to give Zakat, consider not just who receives it but how long the impact lasts.

Traditional Zakat distribution often provides immediate relief — food packages, emergency aid, or cash assistance. This is essential and life-saving. But there's an emerging approach that amplifies Zakat's impact: directing it toward systems that serve Zakat-eligible recipients continuously.

Agricultural programs that produce food for the poor and generate sustainable revenue to fund ongoing relief represent this approach. Instead of a one-time distribution, the same Zakat contribution funds food production that serves eligible recipients year after year.

Certain campaigns within UMMA Farm are structured to be Zakat-eligible under Islamic scholarly guidelines, with clear labeling and compliance oversight. This allows donors to fulfill their Zakat obligation while supporting a system designed for permanent impact.

Zakat FAQ

When is Zakat due?
Zakat is due once per lunar year, after your wealth has exceeded the nisab for 12 consecutive lunar months. Many Muslims choose to pay during Ramadan for increased reward.

Is Zakat due on gold jewelry?
Most scholars (Hanafi, Hanbali) say yes — Zakat is due on gold and silver jewelry if it exceeds the nisab. The Shafi'i and Maliki schools have some exceptions for regularly worn jewelry.

Can Zakat be given to family members?
You cannot give Zakat to those you are obligated to financially support (parents, spouse, children). But you can give to siblings, cousins, uncles, aunts, and other relatives who qualify.

Is Zakat deductible on US taxes?
Yes — Zakat given to a registered 501(c)(3) organization in the US is tax-deductible. Umma Foundation (Tax ID: 86-3883211) is a registered 501(c)(3).