What is Zakat
Zakat is an arabic term that means purification. There are several types of Zakat:
Typically, when we say Zakat we usually mean Zakat al Mal - purifying your wealth. When we have money in savings that lasts with us for more than a year then we take 2.5% of that savings and give it away to one or more of the eight categories outlined in Surah Taubah, verse 60.
إِنَّمَا الصَّدَقاتُ لِلفُقَراءِ وَالمَساكينِ وَالعامِلينَ عَلَيها وَالمُؤَلَّفَةِ قُلوبُهُم وَفِي الرِّقابِ وَالغارِمينَ وَفي سَبيلِ اللَّهِ وَابنِ السَّبيلِ ۖ فَريضَةً مِنَ اللَّهِ ۗ وَاللَّهُ عَليمٌ حَكيمٌ
"Zakat is for the poor and for the needy and for those employed to collect (Zakat). And for those whose hearts will be brought together (for Islam) and for slaves and for those in debt and for (those) on the Way of Allah and for the travelers - an obligation by Allah. And Allah is All-Knowing, All-Wise."
What is Nisab
Nisab is an Arabic word that essentially means a portion. It is the minimum amount you have to have for a year in order to be obligated to pay Zakat. If you don’t have this much money in savings then you don’t have to give Zakat that year.
It is either 85 grams of gold, 595 grams of silver or the equivalent of their cash value. For example, if silver is 89 cents per gram, you have to have $529.55 or more to be able to pay Zakat.
Zakat is not progressive and it doesn’t expire. Every year you have the money in savings, you pay Zakat on the total amount.
Who pays Zakat
Zakat is due on the wealth of any Muslim, young or old, male or female that’s held in savings for one calendar year or more.
What that means is that if you have a joint account with your spouse, then you can just pay on that account. If you and your spouse have separate accounts then you would pay on the money in your account, he or she would pay on money in their account. If you have money saved with your children, and it is above the Nisab, you also pay Zakat on that amount.
How much Zakat is to be paid?
The general rule is 2.5% of your savings after you deduct your expenses. Follow these steps:
When should you pay Zakat
Zakat teaches us to be diligent in keeping track of our income and expenses and learning how to budget throughout the year.
Anytime your wealth becomes equal to or above the Nisab, you become liable to pay Zakat. This can be anytime of the year when you receive the money and how long you have had it. That can be hard to determine especially for those of us who have multiple streams of income and different amounts coming in throughout the year and it is hard to keep track of.
Pick one day out of the year and calculate your Zakat on that day every year.