All Things Zakat From Stocks to Livestock

All Things Zakat: From Stocks to Livestock

Opening

(السَّلَامُ عَلَيْكُمْ وَرَحْمَةُ اللَّهِ وَبَرَكَاتُهُ - assalamu alaykum wa rahmatullahi wa barakatuh)

(بِسْمِ اللَّهِ الرَّحْمَنِ الرَّحِيمِ - bismillahir-rahmanir-rahim)

(الْحَمْدُ لِلَّهِ رَبِّ الْعَالَمِينَ وَالصَّلَاةُ وَالسَّلَامُ عَلَى سَيِّدِنَا مُحَمَّدٍ وَعَلَى آلِهِ وَصَحْبِهِ وَمَنْ تَبِعَهُمْ بِإِحْسَانٍ إِلَى يَوْمِ الدِّينِ أَمَّا بَعْدُ - alhamdu lillah rabbil 'alameen wassalatu wassalamu ala sayyidina muhammadin wa ala alihi wa sahbihi wa man tabi'ahum bi ihsanin ila yawmiddin amma ba'd) I begin in the name of Allah. His Beloved Nabi and Prophet Muhammad, peace and blessings of Allah be upon him, is his last and final messenger. We begin by praising Allah, asking Allah for His help, His protection, His mercy, His blessings, His sustenance, and praying and begging Allah to make us amongst the most successful individuals both in this life and the hereafter, ameen ya rabbal alameen.

Brothers and sisters, once again (السَّلَامُ عَلَيْكُمْ وَرَحْمَةُ اللهِ وَبَرَكَاتُهُ - assalamu alaykum wa rahmatullahi wa barakatuh)

This is your brother Imam Tahir Anwar coming to you live from Zaytuna College in Berkeley, California. I am honored to be here at the college and inshallah in the next few moments that we have together we'll be going through this session that has been titled, or very beautifully titled, "All Things Zakat from Stocks to Livestock."

Now to be honest with you, inshallah we will be discussing stocks. I'm not sure if we will be discussing livestock this afternoon as most people in the western world don't have to deal with livestock when it comes to zakat issues. Inshallah the text that I will be following for a portion of this presentation this evening is Noor ul Idaah, a primarily Hanafi text that is generally taught and is a text that I teach here to the students, the freshman class at Zaytuna College.

What is Zakah?

Zakah literally has two meanings:

First: Purity. Allah mentions in the Quran:

"Take from their wealth a portion of charity that you may purify and sanctify them."

So the first meaning of zakah is purification.

Second: Increase (ziyadah). That's why in the Arabic language there's a term used for when plants have grown - the plants have increased, in other words they have become larger, they have become bigger.

So these two are literal meanings of the word zakah.

Zakah in Islamic terminology, according to Islamic law, is the ownership of a certain amount of wealth by law which Islam says that now you have become wealthy, and to take that wealth and pass it along to those that happen to be in need. There are certain rules and laws around this and we'll slowly be discussing those in the next few moments that we have.

Conditions for Zakah to be Obligatory

Zakah is obligatory upon an individual who fulfills five conditions. In other words, if you don't fulfill any of these conditions, zakah is not an obligation on you:

1. Muslim

You must be a Muslim. A Muslim is required to give zakah, so that's the first condition.

2. Free

A person must be free. If you are a free individual, you're not a slave, you're not bound, in that case you are obligated to give zakah. In other words, you have a right on your own wealth and you have the ability to exercise whatever change you want in your own wealth.

3. Mature

You must be mature. In other words, if a young child under the age of puberty has an amount of wealth - and it could be in the hundreds of thousands or the millions of dollars as long as it belongs to a child, that child is not obligated to pay zakah, nor is the parent obligated to pay zakah on the wealth for that child as long as that money belongs to that child and it doesn't belong to the adult.

4. Sane

An individual must be sane, must have the intellectual capacity in order to ensure that that person can pay zakah. According to other madhabs, such as according to Imam Shafi or Imam Malik, rahmatullahi alayhim, according to Imam Ahmad as well, that if a person is not sane, then that person's guardians or the people that look after that individual must pay the zakah on behalf of that individual's wealth. According to Imam Abu Hanifa, sanity is a condition and if that condition is not fulfilled, one is not required to pay zakah.

5. Possession of Nisab

Last but not least, one must be in possession of nisab. Nisab we will translate here as a minimum amount of wealth. So what is nisab? Nisab is a portion of wealth, a minimum amount that a person owns that requires for that person to pay zakah. If a person possesses this nisab, this minimum amount for a complete lunar year, then the poor now owns this portion and the owner is obliged to pay that zakah.

So that's what the nisab is. In other words, you have to be malikun nisab - the owner of nisab, the owner of a certain amount of minimum wealth which obligates. In other words, if you have that much wealth and you've had it for one complete lunar year, you are now required to pay zakah. And if you have less than that amount,

less than the minimum amount, less than the nisab, then in that specific case you are allowed to receive zakah if you wish to take it.

A lot of people, despite being individuals who are legal recipients of zakah, may decide or may choose not to take zakah and rather live on whatever little income that they make with their own hands and not want to take someone else's zakah, despite the fact that it's completely permissible for them to do so.

Intention in Zakah

One of the things that I want to mention is that when we give zakah, zakah must be intended. Zakah must be intended when that wealth is given.

Now when an individual gives zakah, the recipient does not need to know that this is zakah, though it is an obligation on the giver to ensure that the recipient is one who can receive zakah.

A lot of times it's a very common question - you know, an email or a phone call that says, "My cousin, my relative, my friend, a family member, so and so happens to be going through a certain situation, are they eligible to receive zakah?" That's a very common question.

The simplest answer is that if they have the nisab, the minimum amount, it's not permissible for them to receive zakah. And if they have below the nisab, then it's permissible for them to receive zakah.

But at the same time, one thing that we should keep in mind is that when we give zakah, it must be intended. In other words, if an individual gave an x amount - because zakah is something that can be given in advance as well - once you make the intention...

So for example, Ramadan is about to begin inshallah very soon. May Allah make this month a blessed one for all of us, ameen ya rabbal alameen. But as the month of Ramadan begins, say in the last few weeks, or say between now and tomorrow, or between now and whenever you calculate your zakah, someone comes to you and says, "You know, there's a cause, there's an individual who is zakah eligible, and would you like to give some zakah to this individual?" And say you give $100 or $10 or whatever it is that you choose to give.

Although you haven't calculated - because most Muslims do calculate in the month of Ramadan - though you haven't actually calculated how much zakah you need to give this year, but when you do give, even if it's giving in advance, the intention must be made.

In other words, if an individual gave an x amount of dollars last week and then next week decides to calculate and say, "Well now I've calculated that I need to pay $500 in zakah, but last week I gave $200, I'm going to count that towards my zakah," it would not be permissible. The intention must be there when giving zakah, either on time, either delayed, or even advanced, because giving zakah before it's actually due is permissible. But the intention must be there. If the intention is not there, you can't go back in hindsight and say, "That was my zakah," or "I'm going to calculate that amount that I gave towards my zakah." It's a very common question.

Assets Subject to Zakah

There are a number of things that an individual needs to give zakah on:

Your Assets

When we refer to assets, we are referring to things such as:

• Cash, whether it's in your hand or in the bank or wherever else it is

• Stocks

• Gold and silver

• Retirement plans (there are a number of plans - we'll come to that in a moment)

• Loans and advances - if you've given anyone a loan, you must pay zakah on that as well

• Business inventory - if an individual runs a business, you have a restaurant or you have a store and you sell shoes or whatever it is that you sell, if you have any inventory that belongs to you, then zakah must be paid on that as well

• Livestock - of course as our title today reminds us, from stocks to livestock, livestock is something that zakah needs to be given on as well and there's a set of rules around that

Calculating the Nisab

Maybe what we can do now is discuss the actual nisab. So what is nisab? Or how do you calculate the value of nisab?

According to shara, according to Islamic law, we are required to calculate the nisab based on a specific amount of gold or silver as taught to us by the Messenger Muhammad, peace and blessings of Allah be upon him.

So as long as an individual has either an x amount of gold or its value - it doesn't have to be specifically gold, it could be the value in the form of any assets as I mentioned earlier: business inventory, stocks, cash, assets, jewelry - as long as you reach that nisab based on a specific amount of gold that the Prophet, peace and blessings of Allah, has prescribed, or silver, and you can use either to calculate.

For those of us that might not have calculated, may not know what I mean, I'll explain that in a moment.

So zakah is calculated based on the current value of gold and silver. In other words, not based on the value of what you might have purchased if you are actually calculating your gold and silver some 5, 10, 15 years ago - it's on the current market value.

You can either use silver or gold to determine the value of nisab, but also keep in mind that the value of silver will be far less than the value of gold. That's why the ulama, the scholars of the tradition, have an opinion in terms of determining whether or not you should give zakah: use the lower threshold, which is the nisab

zakah or do they not receive zakah?

So that's the golden rule that I mentioned earlier:

In determining whether you should give zakah or not, the ulama are of the opinion that use the lower threshold - the threshold, the nisab according to silver - so more people would give. All those that fall between $384 and $3,300 would also become givers, so more people would give zakah. And this is not a general rule per se, this is what the ulama, this is what the scholars they give an opinion based on taqwa. Although technically, if someone chose to not give zakah, that would be fine as well.

And in terms of receiving zakah, the ulama are of the opinion that you should use the higher threshold - that of gold - so that more people would benefit in terms of receiving zakah.

So that's the nisab in a nutshell.

Passing of One Lunar Year

One of the things that we've been mentioning time and again is that passing of one year - the passing of one year, one lunar year. A lot of people generally misunderstand this.

It's one lunar year from the time your wealth reached the nisab, not one lunar year based on when you made that money.

So one thing that we should clarify - and maybe Muslims in America may identify this more than others - but in the United States we pay taxes based on our annual income, as it is in most parts of the world. You pay taxes based on your annual income.

In Islam we pay zakah based on our annual savings. We don't pay based on our annual income.

You could be making a million dollars, you could be making a few million dollars, but at the end of the lunar year, depending on what you have left is what you would pay your zakah on - not necessarily on what you made all year.

In other words, if someone liquidated all their assets or spent it all up or did whatever it is that they wanted to, they could have made a few million during the course of the year, but at the end of the lunar year they have absolutely nothing left. In that specific case, they have no zakah that they need to pay.

But one thing that I do want to clarify that I was about to say a few moments ago is that your lunar year is calculated from the time that you became the owner of nisab - became the owner of that threshold, became the owner of that minimum amount.

In other words, let's argue and say that we are going to take the silver as our minimum amount because we want to be amongst those who give. So you happen to be a student. You have absolutely no money. All the money that you do have is your parents' money that you're using and so on and so forth, or whatever it is. And all of a sudden you go to work, you went to work and you made an x amount of dollars. The moment you made that

money - and let's just argue for a moment and say that your first paycheck was $800 - at that point in time you became the owner of nisab. You became the owner of that amount which is the minimum amount, the threshold. You've surpassed the threshold. That's when you become the owner of nisab. That's when your lunar year begins.

One year from that day, if you have any amount of wealth that happens to be above the threshold, above the nisab, you will give your zakah.

Important Example

Now what that basically means is: Let's argue and say that last year on the first of Ramadan I was the owner of nisab. Fast forward almost one year on the 15th of Shaban, 15 days, 14 days before Ramadan, I had a business or I was working and I got a bonus and someone put $50,000 into my account which belongs to me. However I made it, it's now $50,000 that I now have, whether it be in the form of cash, savings, jewelry, stocks, whatever it may be, but it's $50,000 I now own.

Come the first of Ramadan, the question is - and this is a very common question - do I pay zakah on that $50,000 that I just made two weeks ago or not?

And a lot of people misunderstand this and say, "Well I've only had this amount of wealth, the $50,000, for two weeks and it's not an entire year. Because it's not an entire year, I don't have to pay zakah on it."

Wrong.

As long as you become the owner of nisab on the first of Ramadan last year, then fast forward one year on the first of Ramadan the next year, whatever amount of wealth you have - whether that wealth, that entire amount of wealth was with you for one year or not - as long as you were above the nisab at the beginning of the year and above the nisab at the beginning of the next year, you will pay zakah on whatever you have in terms of assets on that day.

Otherwise, the problem then would be that you would have to be calculating zakah every single day and say, "Well last year on this day I only had this much, last year on this day I only had this much, last year on this day I only had this much," and we'd have a different amount every day.

So as long as - let's understand this correctly - as long as you happen to be at the beginning of the year above the nisab and at the beginning of the next year above the nisab, whatever amount you have, whatever assets you have that you have access to, you will pay zakah on that, even if you haven't had that large amount for an entire year. You've had the nisab for an entire year and you must pay zakah on it.

Calculating and Giving Zakah

So there's a lot more laws and I'm going to speak about a few more things before I continue with questions. But one thing I want to mention - and hopefully if you have time I would urge you to go online and type in "the

inner dimensions of zakah." If you go to Google and type in "inner dimensions of zakah" and read the few points that Imam Ghazali, rahmatullahi alayh, has authored on this...

You know, in Islam we're encouraged to give. Though one very important thing with zakah is that we must calculate. A lot of times people just randomly give and say, "This is a few hundred dollars, a few thousand dollars and this is my zakah," and feel that they've fulfilled their obligation of giving zakah just by having given zakah whenever they wanted to.

One must at the end of that lunar year sit down and calculate all their assets and at that point in time find out how much zakah they need to give.

The amount of zakah one needs to give is 2.5%. Right? So divide it by 40, which is the easiest way, or get your calculators and figure out the 2.5% and that's what you need to give.

But one must calculate and know exactly what they need to give in terms of their zakah. You can't randomly just write a few checks and say, "This is my zakah," without ever having calculated it.

Yet at the same time, one must calculate and the ulama are of the opinion that give a little more, give a little more than what you really need to, inshallah. And as Imam Ghazali mentions, the more you give in the path of Allah, the more Allah would give back to you in return.

See, zakah means purity, as I mentioned earlier. In other words, that wealth, that 2.5%, upon zakah becoming an obligation on you, is no longer yours, no longer belongs to us. That is someone else's haq and that is someone else's right.

And if we don't take that portion away from our wealth, that's haram for us. That's haram wealth touching our wealth - haram for us, halal for someone else. How do we expect barakah in our wealth, in our assets, in whatever we have, when there's haram that's not a part of it, when it doesn't belong to us to begin with? Islam says that is no longer yours. That must be taken and be given away to those that are valid recipients.

And when we do give in the path of Allah, Allah protects us, our families, our jobs, our institutions, and Allah continues to bless us with more and more and more.

Inner Dimensions of Zakah (Imam Ghazali)

So zakah should be - Imam Ghazali mentions and these are lengthy topics but very briefly - zakah mentions that Imam Ghazali mentions that:

1. Zakah should be given at its proper time

In other words, when the lunar year is up, one should give it. Most people do calculate their zakah in Ramadan and then they give it.

2. Give it in secret, give it quietly

Give it in the open, give it so that people can see that you're giving and hopefully inspire others to give.

3. If you're going to give to someone who happens to be poor, be humble

Avoid taunting others, avoid hurting others. In fact, the predominant opinion of the ulama is that the recipient of zakah can be a relative. In fact, giving to a relative is more praiseworthy, is of more reward than giving to someone who's not a relative.

Also, the recipient does not need to know that it's zakah. You could give it to them however it is, as a gift or however, and they don't need to know that it's zakah.

4. If you're amongst the givers, the ulama mentioned that give your best

Give the best that you can. Don't look at the cheap. Now in most of our cases we actually give cash and hard money, but in certain cases people actually gave gold and so on and so forth. But the ulama mentioned that give your best and seek the worthy and deserving.

Seek the worthy and deserving. That's why in the Hanafi school, one of the opinions is that the recipient must become the owner - there has to be tamleek. That's a condition in the Hanafi school. That when you give your zakah, if you have an x amount of dollars or whatever it is, say you have a hundred dollars, you must take that hundred and make someone else the owner of that. Only then is your zakah fulfilled. And if you don't make someone the owner, then your zakah is not fulfilled.

And so that's: seek those that are worthy and deserving. That's why in the Hanafi school, giving zakah to institutions who may utilize those funds for their institution building is actually not permissible. The predominant opinion in the case of institutions that are educational institutions: we can and should give our zakah to institutions because those institutions will then in turn take that money and utilize it for their students who happen to be needy, who happen to be recipients of zakah.

But there is an opinion that simply masjid building or works where the general population benefits from, one's zakah - that would not be permissible. It has to be specific.

Recipients of Zakah

Now as far as the recipients, and I'm going to come to your questions in a few moments inshallah as soon as I'm done with this, there are a number of types of recipients that zakah can be given to, and the Quran mentions this:

(9:60 Quran) إِنَّمَا الصَّدَقَاتُ لِلْفُقَرَاءِ وَالْمَسَاكِينِ وَالْعَامِلِينَ عَلَيْهَا وَالْمُؤَلَّفَةِ قُلُوبُهُمْ وَفِي الرِّقَابِ وَالْغَارِمِينَ وَفِي سَبِيلِ اللَّهِ وَابْنِ السَّبِيلِ

1. Al-Fuqara )الْفُقَرَاءِ

The first individual, the first recipient happens to be a faqir - an individual who possesses wealth but is below

the nisab.

2. Al-Masakin )الْمَسَاكِينِ(

The masakin are those that are extremely destitute, helpless. They don't own anything. In other words, they don't even own a basic amount of minimum wealth. They are of a lower category than the fuqara, the first category.

3. Al-Amilin Alayha )الْعَامِلِينَ عَلَيْهَا

As far as the third category are those individuals who are employed to collect zakah. The predominant opinion again here is that only if that appointment is by the head of the Islamic state. If that appointment happens to be by an employer, by just any non-profit employer, there are opinions of the ulama that would not fulfill that category.

4. Al-Muallafati Qulubuhum )الْمُؤَلَّفَةِ قُلُوبُهُمْ

Those whose hearts are to be reconciled.

5. Fi al-Riqab )وَفِي الرِّقَابِ

For freeing slaves.

6. Al-Gharimin )الْغَارِمِينَ(

People who are in debt, extreme debt. People who happen to be in debt can be given zakah.

7. Fi Sabilillah )وَفِي سَبِيلِ اللَّهِ

And striving in the path of Allah. This is a category I briefly want to speak about.

In the West nowadays, every act of good Muslim deeds is considered to be في سَبِيلِ اللَّهِ And people say, "Well, the masjid falls into في سَبِيلِ اللَّهِ". في سَبِيلِ اللَّهِ This service falls into

The predominant opinion here is that those individuals who are physically fighting in the path of Allah - those are individuals who can become recipients of that. Otherwise, the في سَبِيلِ اللهِ category as understood today is generally not what has been understood for generations and traditionally.

8. Ibn al-Sabil )وَابْنِ السَّبِيلِ(

And the traveler. That's the last category.

But khair, ultimately, we ask everyone to ensure that they consult with their imams and their shuyukh and ensure that they give their zakah based on whatever categories they are most comfortable with.

Questions and Answers

I think what we're going to do is we're going to segue into... We don't have a lot of time left. We're going to segue into certain questions. I'd like to thank those individuals who proactively ensured that they sent in their questions well in advance.

There's a number of individuals who actually sent in their questions and we're going to try to get through those.

401(k)s and Retirement Accounts

The most common question that we get are those around 401(k)s - 401(k)s, shares, stocks that people end up having. There are multiple opinions available. So the question is: Is zakah due on your 401(k)? People are a little confused around this issue.

Although there are a number of opinions, there are three primary opinions on the case of giving zakah on your 401(k)s:

Opinion 1: Pay zakah on the total value

Pay zakah on the total value of the 401(k) the day you're doing your calculations. So first of Ramadan, third of Ramadan, I'm doing my calculations. Whatever the value is of your 401(k) on that day, including the employer match that has vested so whatever portion belongs to you on that day - you will take that amount.

Say your 401(k), your IRA, your retirement account is at $150,000. You calculate zakah based on $150,000 and you take 2.5% of that and you give it.

Opinion 2: Pay zakah annually minus penalties and taxes

The second opinion is that you pay zakah annually - again, annually, this is very similar to the first one - on the amount that you have minus any penalties and taxes that you would have to pay if you withdrew that money.

So say your 401(k) is worth $150,000, and if you were to cash out that 401(k) on that specific day, then whatever penalties you would have to pay, you would deduct that. Whatever taxes you would have to pay based on your tax bracket, you would deduct that. And let's just argue and say that you were left with $115,000. You would pay zakah on $115,000. That's the second opinion.

Opinion 3: Pay zakah at the time of retirement

The third opinion is that you pay zakah on your 401(k) at the time of retirement. In other words, whenever you actually get - you have access to - that entire 401(k) at the age of 60, 61, when you have access to that, you would pay zakah on it at that time.

Again, the predominant opinion there is that you would pay zakah for each year, not just once. Some people falsely believe that the year you receive it, you just pay zakah on it that year. No. When you receive it, you would have to pay your zakah on it for each year that you actually had it and you were above the nisab and you were paying your zakah.

And so you would have to do it for each year and so you'd have to go back into your accounts and see, "Well, if on year one I had $5,000," you would pay zakah on $5,000. Year two, my 401(k) went up to $15,000. You would pay zakah on $15,000, not just the $10,000 that was increased.

Year three, I now have $25,000. Your increase was $10,000 between the $15,000 and $25,000, but your zakah will actually be on the entire $25,000 and not just the $10,000 that increased, because zakah is based on the total value of all your assets, not just the increase in that last year.

I mean, I explained this earlier that when you pay your zakah, you pay your zakah based on the value of the complete assets that you have, not just what was increased in that one year. So that's the one thing that I want to mention.

Stocks

A lot of people get confused when it comes to zakah and 401(k). So since we're talking about stocks, I'll attempt to answer a few questions around stocks.

Stocks include:

• Stocks purchased in the open market in one's brokerage account

• Company-granted RSUs (restricted stock units)

• Company-granted stock options

• Company-sponsored employee stock purchase options or purchase plan (ESPPs)

How do you calculate zakah on those?

You calculate zakah based on the market value, not based on the value the day you receive them. You pay zakah based on the market value the day you are calculating your zakah.

RSUs

As far as calculating zakah on RSUs, you would calculate it based on those RSUs that are vested, again, based on the market value. You wouldn't pay zakah on those that have not vested.

Stock Options

As far as zakah on stock options - we won't get into the legal permissibility of that, we're just referring to giving zakah on stock options - you would pay zakah on that which is vested and on the profit that you have.

ESPPs

As far as your ESPPs, employee stock purchase plans, you would pay zakah on the amount that's been withheld for the purchase of those options. You would pay zakah on that. And if you actually bought those stocks or those shares, then you would pay zakah on the market value.

Important Note: You don't pay zakah on gold and silver jewelry per se. You don't pay zakah on diamonds and platinums and rubies, etc.

Retirement and Savings Plans

As far as another form of wealth that we generally don't calculate or we tend to forget to calculate happens to be your retirement plans and health saving plans and so on and so forth.

Zakah must be paid on all retirement and savings plans because essentially that money is yours and it's an asset that you own. Although it happens to be an asset in a different format, it happens to be sitting in some account and not necessarily just a savings account, but you must pay zakah on it.

And I mentioned earlier your 401(k)s, you must pay zakah on that:

• IRAs - zakah must be paid on that

• Roth IRAs

• 529 college savings plan

• Health savings plans (HSPs) - a lot of people tend to forget when we're calculating

• Flexible spending accounts

All of these, all of these, one pays zakah on. And the rule is that which I mentioned earlier:

Either you pay zakah on the actual value of what you have today - market value of what you own - or you pay zakah based on what you would have minus penalties and taxes if you were to take those out of those accounts. And if you're not allowed to take those out of those accounts at that given time, but zakah must be given.

When You Don't Have Liquid Assets

A lot of times people have 401(k)s. They have a large amount of money sitting in their 401(k)s, but they don't have the liquid assets to pay their zakah. A lot of times women have, or men anyone for that matter - may have a lot of gold or jewelry, but they don't have the cash to give zakah on that.

So this opens up another question: Must zakah be paid immediately or not?

No, you don't have to pay immediately. But you are required to calculate. You're required to calculate.

So say on the first of Ramadan you calculate that "I have all of these accounts. I have my cash, savings, 401(k), IRA, HSP, ESPPs, whatever else it is that I have. I put all this together and I come around and my net worth is whatever, half a million dollars."

Zakah on a half a million dollars would come up to $12,500. Say you don't have liquid assets of $12,500. You would give whatever you can and then you would write it down somewhere, make a note of it, and spend the next few months ensuring that that obligation has actually been fulfilled with the liquid assets as you receive them.

So you don't have to give immediately. In fact, many a time individuals sort of calculate their zakah, leave it aside, and spend seven, eight, nine months slowly distributing that zakah so that they actually have enough money to distribute during the course of the year.

And when they actually run out of their zakah before the month of Ramadan comes in and before they can begin calculating, they start giving in advance. And maybe they've already given, say, $5,000. By the time they calculate their zakah, they find out they need to give $12,500. They've already given $5,000 in advance with the intention of zakah at the time of giving. Then they can deduct that $5,000 from the $12,500 and have $7,500 that they need to give.

Jewelry Without Liquid Assets

As far as people who may have jewelry but don't have the liquid assets to give zakah on that, it's still an obligation. Zakah still needs to be given on that gold, on that jewelry.

In other words, I like to tell people that if you have two earrings and a whole lot of other jewelry and your zakah that year happens to be one earring - equivalent of one earring - that earring needs to go. Or you need to take some other portion of that gold and make it a liquid asset in order for you to be able to give your zakah. The zakah must be paid.

In the case of individuals, if a wife gives zakah on behalf of the husband for his assets, or if the husband gives zakah on behalf of the wife for her assets that she may have because either of them isn't working or they are but one chooses to give zakah on behalf of the other, that would be permissible. That obligation is fulfilled and that obligation is lifted at that time.

Loans and Debts

Now there's another question. The question is: Do you pay zakah if you have loans?

So when it's time to give zakah, one of the things that you do is you deduct the loans. You deduct your payments that you have to make and then... let's just say that your assets are worth $50,000 and you have given loans of an x amount of dollars or you need to make payments of an x amount of dollars. Then in that specific case, do you deduct that loan from your full asset or not?

Most Muslims in the West, if we began to deduct the loans that we have to pay - the loans that we have taken on ourselves, your house payments, if you own your house and you have an institution that you are making payments to and you owe them an x amount of dollars, or car payments, for example - if Muslims in the West started deducting their loans from their assets, then most Muslims in the West would actually not be paying zakah. And the reason they wouldn't pay their zakah is because the amount of money that they owe is far greater than the amount of money that they have.

The contemporary ulama are of the opinion that if you have debts, if you have loans on which you are simply making monthly installments or monthly payments, those loans will not be deducted from your assets.

So, for example, you have $300,000 that you need to pay zakah on but you have a mortgage of $500,000. Well, you can't say, "Well, I have a mortgage of $500,000 which means I'm negative $200,000 so I don't pay zakah."

If that's the case, most Muslims in the West - not all, maybe not most, but many Muslims in the West - wouldn't pay their zakah or car payments or student loans and so on and so forth.

So the general rule is that any long-term loan that you have would not be deducted from your assets at the time of calculating your zakah.

This is the exact same stipulation in regards to hajj as well, because a lot of times people actually have tens of thousands of dollars put away to go on vacation or whatever else, but then they have a loan of a few hundred thousand dollars and say, "Well, I can't go for hajj or I can't pay zakah because I have a loan of an x amount of dollars," and they may utilize those liquid assets that they have to go on vacation and so on and so forth.

The ulama are of the opinion that unless and otherwise you are going to take that savings of yours and pay off your loans with it - if you're not going to do that, then you must pay zakah on those assets that you have. And I hope I've actually clarified that.

Children's Money

I mentioned earlier any money that belongs to the children - and that if you are investing, you're doing it for the children - then there is no zakah obligated on it.

Loans Given to Others

If you have given someone a loan, the person who has given the loan must pay zakah on the money that has been given. You could give it when you receive the loan back. You don't have to give it at that time if you don't have the assets.

If that loan is considered to be a bad debt, a bad loan, and you realize that that person is probably never going to pay you back, then in that specific case you would actually not pay zakah on it.

Business Inventory

As far as zakah on inventory - say you own a bakery, say you own a shoe store - in all those specific cases you would calculate your assets, you would calculate your inventory on the day you're calculating your zakah, and then you would give your zakah on that given day. You would calculate all that inventory, put it all together, whatever amount you come up with, two and a half percent of that is that which needs to be given.

Land and Homes

Land and homes, rental properties: There is no zakah on the actual rental property. There is zakah on the income of the rental property if you have money left at the end of the year.

So say you have a rental property. You have your own house, then you have a second or third or fourth house. Let's just assume that you have one extra house and the house is worth $100,000. You do not have to pay zakah

on that actual property. You would pay zakah on the income of that property.

So let's assume that you're getting $1,000 in rent from that property times that by 12. In the course of one year you receive $12,000. But let's again... so if that $12,000 is considered your income, do you pay zakah on income? You don't pay zakah on income. You pay zakah on your savings, which basically means that if you don't have anything left of those $12,000 at the end of the lunar year, then you will pay no zakah on it. If you have some money left from that $12,000 at the end of the year, then that's what you would pay your zakah on.

Unless and otherwise you purchased a home with the intention of reselling it. If you purchased a home with the intention of reselling it, then that is an inventory and zakah must be paid on that. You may not have the money to pay zakah on that home because you've put all your money into that, but whenever that house is sold, then you would pay zakah. You would go back and pay zakah whatever you owed on that as soon as you receive the liquid assets to do so.

The same case goes with land. A lot of individuals buy land with the intention that someday they may build a house on it, someday they may sell it, but it's not necessarily an inventory. They haven't specifically purchased it with the intention of selling it and making money. If that's the case, then you do not have to pay zakah on it.

Though clearly, if an individual has purchased a piece of land with the intention of reselling it and making money on it, then that becomes business inventory and you would pay zakah on the market value of that property - not purchase value, on the market value of the property.

And again, similarly, if an individual actually purchases a property, just purchases it, and then later on decides to make it business inventory, then at that point in time that individual begins to pay zakah on it. Or a person decided to purchase it with the intention of reselling it and making money on it but later on decided that "I plan to live in it" and so on and so forth. When the intention changes, whether it becomes zakatable or not changes as well.

Distribution Guidelines

There's a number of other stipulations, but very quickly: How much zakah should you give to an individual?

Some ulama are of the opinion that you should not give them more than nisab that obligates them at that point to give zakah as well. But keep in mind that that will just put them above the threshold, above the nisab. They won't actually pay zakah on it unless and otherwise they actually are above the nisab a year from then. So they don't immediately become the owners of nisab.

One of the things Imam Ghazali mentioned - and I mentioned earlier - is find those that are deserving, find those that are worthy of receiving.

And alhamdulillah, we have many institutions now in the United States of America that are taking our zakah funds and very carefully distributing them amongst those individuals that need those funds. So for example, in this institution of ours like Zaytuna College, when the generous community around the country gives their

zakah, Zaytuna College ensures that zakah-eligible recipients are actually given that zakah and not just utilized for building or construction or maintenance and so on and so forth.

Or you may know individuals. You may have leaders in your community, friends in your community, or people - just people in your community - who may know destitute, helpless, homeless people, people who are respectable in our communities and may not necessarily be able to put their hands out and ask us for assistance. But there are people in the community that know.

And I'm saying this from my experience as an imam of a masjid where I've been alhamdulillah for a number of years, for over a decade now alhamdulillah, where I know a lot of people in the community that are very respectable. You know, people know them very well, but internally I know that these are people that are almost paycheck to paycheck. And many of them may not even be paycheck to paycheck.

And if that happens to be the case, go to your local imams or teachers or leaders or whoever it is and ask them, "Are there people in our communities that are worthy of my zakah?" And yes, it is permissible to make a tax deductible donation when you are giving your zakah. One shouldn't feel guilty about it. It's perfectly permissible to do so.

So can you give someone more than the nisab in terms of zakah? Yes, you can. But at the same time, find worthy individuals in your community that you should give to.

Sending Zakah Overseas

Then the second stipulation is: Is it permissible to send your zakah overseas or not?

There are multiple opinions on this. In fact, in the text that I was using a few moments ago, Imam Abu Hanifa, rahmatullahi alayhi, is of the opinion that the zakah of that land should be distributed in that land unless and otherwise there was a dire need elsewhere where people could actually give.

The way the Muslim community is set up today is that because of the number of immigrants that we continue to have in our communities, a lot of our zakah dollars continues to go overseas. And there is absolutely nothing wrong with that. That's perfectly fine. Our zakah is being fulfilled and worthy individuals are receiving the assistance and they're able to make their lives a little better than what they were before. Allah facilitated for us to give that zakah to them.

But at the same time, if we happen to be of a category of individuals where a hundred percent of our zakah goes overseas, then we need to reevaluate our priorities. We need to reevaluate how we distribute our zakah.

Always try to ensure - don't just randomly give zakah to institutions. Find out how are they utilizing your zakah. Are they utilizing it to pay light bills? Are they utilizing it for utilities and so on and so forth? Or is that money going to the poor and needy? Because zakah is from the rich to the poor. Zakah is from the rich Muslim to the poor Muslim. Zakah is from those who have wealth to those who do not have wealth. And so be conscious of that.

Family First

You can give zakah to:

• Your brother
• Your sister
• Your nephew
• Your niece

These are people that you can give your zakah to.

You cannot give your zakah to any individual whom you are obligated to look after, such as:

• Your wife
• Your children
• Your spouse

And so on and so forth. But at the same time, you can give your zakah to your brother, sister, nephew, niece. Relatives come first.

And then after that, as you distribute your zakah, always ensure that you make room for national institutions. As you make your contributions to international institutions, we have zakah-eligible Muslims right here in the United States of America. We have homeless Muslims right here in the United States of America. We have Muslims who do not have a meal right here in the United States of America.

So for those individuals who are under this deception that every Muslim in America is rich and all the poor Muslims are overseas, we need to rethink that. There are a lot of Muslims right here in this community of ours that happen to be in need as well.

Give Generously

How do you account for error in the zakah that you calculate?

Always try to give a little extra zakah. You know, it should pinch you a little. It's meant to pinch you.

"You will never attain righteousness until you spend from that which you love."

Spend out of that which you love. If our contribution, if our giving doesn't pinch us, then we haven't received the full reward. It should be a little difficult for us.

Put your trust and promise in Allah. The more... if you... I mentioned this last week in my khutbah: if you count your money, it is because you count your money, right? Give without hisab within your capacity. Give without hisab within your capacity, and Allah will bless us without hisab.

The moment we start... you know, you still have to calculate. You still have to calculate, don't get me wrong. You still have to calculate all your assets. Once you've done your calculations, now don't nickel and dime Allah. "Well, this I can give away, this I should do away with, this I can do..."

No. You know, it's okay. A few hundred dollars that you may have to give extra in some cases. A few thousand dollars.

I remember last year I was asked a question and then I did not know the answer, so I consulted with a few friends of mine. And one of them responded and said, "Though technically you don't have to give your zakah on this amount..." - and the question was around two hundred and fifty dollars, a very specific question that I got asked last year - and so one of the scholars commented to my question and said, "You know, if an individual has ten thousand dollars of assets, giving away two hundred fifty shouldn't be so difficult, especially when you're thinking by giving this two fifty, Allah will protect the ten thousand that I have. And by giving this two fifty, Allah will increase this ten thousand dollars that I have."

So always try to keep that in mind when we're giving. Always try to give extra. And inshallah, what I'm going to do is I'm going to stop there inshallah based on our promise that we will end at six o'clock.

May Allah accept our zakah, purify our wealth, and make us among those who are generous in His path.

Ameen ya rabbal alameen.

وَصَلَّى اللَّهُ عَلَى سَيِّدِنَا مُحَمَّدٍ وَعَلَى آلِهِ وَصَحْبِهِ وَسَلَّمَ

السَّلَامُ عَلَيْكُمْ وَرَحْمَةُ اللَّهِ وَبَرَكَاتُهُ