Mustafa Umar – Zakah Everything You Need To Know
AI: Summary ©
The speakers stress the importance of investing in one's wealth to reduce poverty and eliminate poverty, and emphasize the importance of not delaying payments to avoid paying the minimum amount of productive wealth. They provide examples of how to distribute savings and emphasize the importance of avoiding negative consequences and not wasting money when making payments. The speakers advise the caller to use their best judgment and not ask too much, emphasizing the importance of avoiding paying off their 401k until they have enough money to pay off their z Ace and to use their best judgment.
AI: Summary ©
Alright.
Welcome to the, Zakat seminar for young professionals.
Seems like some of you,
at least self defined as being unprofessional, so
that's fine. Everyone is welcome to attend.
So I'm gonna get straight into it because
there was a few minutes, delay. So let's
begin with the zakat. So what exactly is
zakat? What's the definition of zakah? Who can
tell me how you define zakah? Anybody?
Yes. Purification.
Purification. Not so much linguistic, like, Islamically. What
is what is zakah?
What's it called? Your annual,
charity. Annual charity. Okay. Anyone else? Better definition
or more specific definition?
Obligatory alms.
Obligatory alms. Okay. Or obligatory charity. That's good.
So basically, like an obligatory charity, a mandatory
charity that every single Muslim needs to give,
which is about 2.5%
on your wealth every single year. That's in
a nutshell what
zakah is.
And what are the benefits of Zakah? There
are a lot of benefits of Zakah if
we look at it from a different perspective.
So first of all, Zakah helps those people
who are in need. That's pretty obvious because
when you're giving out charity, whenever you give
charity, it's gonna help people who are in
need. But it also helps to bridge the
gap between the rich and the poor. Because
if you think about it, in every single
community where there are Muslims,
the ones who have this amount of wealth
are gonna be giving it to the ones
who don't have this amount of wealth. And
now you have an economic redistribution
taking place within society.
Also, it's gonna remove envy and hatred from
the poor to the rich.
One of the biggest problems that you find
in the world, if you find if you
look at it from a purely
Karl Marx
perspective, a Marxist perspective,
one of the major causes of revolutions in
the world is
economic disparities between classes.
So what this is gonna do is there's
and you find this even in again, this
doesn't mean this theory is correct, but has
some elements of truth to it. You find
even today when it comes to the Liberals,
the the the Democrats and the Republicans, you
find any type of 2 extreme parties in
any society,
you find that the envy and hatred against
the rich plays a role in the lack
of stability
in that society.
So what Zakkai will also do from a
sociological
perspective actually remove some of that envy and
hatred because wealth is being redistributed
regularly.
For people who have the wealth, it's also
gonna prevent prevent greed and prevent stinginess because
it forces you to give some of your
money out. Some people are so stingy, they
won't give any charity no matter what. This
mandates the minimum amount of charity that has
to be given by every single Muslim. So
it gets them into the idea of they
have to be giving something whether they like
it or not. This is a requirement. It's
not an option.
Also, it purifies your wealth. So when you
have wealth, if you give your zakat, your
wealth is gonna be purified, which basically means
it's not like your dollars become cleaner or
something like that, it means that there's gonna
be more blessing in what you have. If
you have a lot of money and there's
no blessing, if you have you you stole
that money, you made that money through, like,
you know, drug trade or something like that,
there's not gonna be much blessing in your
money. So when you spend it, you think
you're gonna get happiness or you think good
things are gonna happen with that money?
Actually, you find out that people with a
lot of wealth, if it's not blessed by
Allah, you'll find that that wealth doesn't actually
help them very much even though it's a
lot in quantity. So it blesses the person's
wealth as well.
What it also does,
this is very important for young professionals in
particular,
is it teaches you or actually it pressures
you to invest your money. Because if you're
a Muslim and you make money and it
just goes in the bank or it sits
in cash at home,
2.5%
of your wealth is going out every single
year
and
that's not counting inflation.
So add another 2 a half percent or
3% for inflation, your money if it sits
in the bank every year it's going down
by about 5%, which means that if you
wanna just make sure that your money is
even staying as a proper savings,
you need to be investing that and aim
for at least a minimum of about 5%
return annual,
which is pretty reasonable return given safe investments
and all of that. So it gets people
into the mentality of don't just put your
money in a safe deposit box, don't just
put your money sitting in the bank account
because you can't collect interest anyways as a
Muslim,
but you need to invest that wealth. And
when you invest that wealth, what does that
actually do? It recirculates wealth within society. So
it actually helps society to be more functional
rather than the wealthy people just hoarding on
to their wealth and not letting it recirculate
within a society. So there's a lot of
benefits to zakat and also has the potential
to eradicate property
from the world if people would pay theirs
like our property. So let me give you
an example. Right? So there are
2,640
people in the world that are billionaires.
If you calculate all of their net worth,
I think Elon Musk is the number one
in the world in terms of his net
worth. If you calculate all of their net
worth combined,
it's $12,200,000,000,000
as of last year's stats.
$12,200,000,000,000
Now that means if they paid Zakat on
that money,
it would be, anyone calculate in their mind?
I don't expect you to, right? It'd be
$305,000,000,000
of money that would have to be given
out to the poor. Now you calculate that
$305,000,000,000
every year is gonna be distributed to the
poor.
How many people
live below the international
poverty line? The international poverty line is
$2.15
per person per day. If you have less
than that, if you make less than $2.15
per day per person, you're below the international
poverty line. There's 897,000,000
people in the world who live under the
international poverty line. If you were just to
redistribute the $305,000,000,000
to the people who are under the international
poverty line,
what would happen?
That's what Zakat has the potential to do.
And that's only
less than 3,000 people paying their Zakat. Again,
these are not Muslims mostly. So but
if it was,
if zakah was paid correctly,
it would eradicate and eliminate poverty in all
parts of the world where Muslims are there,
very simple system. Alright, so that's the benefits
of zakah, the importance of zakah. Zakah is
mentioned in the Quran 82 times,
That's a lot, means it's very important.
32 times it's mentioned alongside prayer. Allah says
and pray,
make sure you pray
and give your zakah. So that means zakah
is as important as prayer in the life
of a Muslim. So it should not be
taken lightly. It should be taken very, very
seriously. The same way you don't skip your
prayers, you don't skip your zakah. The same
way you don't delay your prayers and pray
late, you don't delay your zakah and be
like, ah, I'll just pay it next month.
Not a big deal. No. It's a big
deal. It's a really big deal.
And also there's so many warnings from Allah
in the Quran about those people who don't
pay their zakat. And from the prophet, peace
be upon him, the people who don't pay
their zakat, that wealth, that money used to
be in gold and silver form, It will
be heated up in fire and it will
come and actually will be basically attacking them
on the day of judgment because they didn't
pay their zakah that was due on them.
It's a lot of very graphic scenes
to warn people about how serious zakah really
is.
Who needs to pay zakah?
K. So the people who need to pay
zakah, number 1, adults who are Muslim need
to pay zakah. That means children don't have
to pay zakah even if they have some
money, but it also means that
a wife is independently responsible for paying her
zakat. Children
who reach who become adults,
they're responsible for paying their zakat. So they
can't say, you know what? I thought my
dad was gonna pay it for me. Or
if a wife says, you know, I thought
my husband was gonna pay it for me.
Or if a husband
is
a little bit lazy and he's like, I
thought my wife would pay it for me.
Like, she shouldn't be happy because that's a
double problem actually. We'll talk about that counseling
later on. But, everyone is responsible
individually
for paying their own zakat.
Second
thing is that you must own the minimum
amount of productive wealth
to pay zakat, and this is called nisab.
Now nisab is a pretty important term, like
some words some terms you should know in
Islam, like you should know what salamu alaikum
means. Like if you just say peace be
with you all the time, like that's an
Arabic word that you should memorize, like a
statement. You should know what wudu means. We
can't be like ablution,
you know, all these other weird terms that
come out there. Some Arabic terms are worth
memorizing. This is one that's worth memorizing called
nissab
because it's so hard to translate in English.
Nisab means the minimum amount of productive wealth
that you need to pay as a cap.
It's just hard to say nisab, it's a
little bit easier. But anyways,
nisab
means if you have
more than this amount of money,
you're considered to not be poor,
Islamically.
And if you have below that, you're considered
to not be well off. If you're above
that, you pay zakat. If you're below that,
you receive zakat. Very simple. That's what nisab
is. So if you have over the nisab,
you're gonna be paying this account.
Now what is NISSAB? It's 85 grams of
gold.
The if you calculate what is 85 grams
of gold as of today, it's $5,917.70.
So if you have more than that amount
of money at home in cash plus the
money that you have in your bank and
all of the money that you have, then
you are above and dissolved. You are basically
in the category of you're supposed to be
paying this account. Okay? But
you actually have to have had this last
year as well.
So if you had this minimum amount, the
Nisab,
last
year, which is a lunar year, which is
354
days, like Ramadan till Ramadan is 354
days. It's not 365 days like the solar
calendar. So if you had this amount, if
you had over 85 grams of gold last
year and you have over 85 grams of
gold this year,
you must pay Zakat
on the amount of money that you have
right now. So if you have $10,000
right now and you had $6,000
last year, you pay 2.5% on $10,000
as a requirement.
K? So that's the way it works, and
you have to have full ownership of that
wealth.
Meaning, let's say you have stocks which are
not vested in your company.
You don't have to pay them. It's like
out for that. If you have,
RSUs, reserve stock units, for example, as part
of compensation of your company, but they have
no market value because your company is not
publicly traded yet,
or the company has not been sold, and
they have no value, you're not able to
sell them to anybody, then you technically don't
own them. They don't have any value, so
therefore,
you don't have full ownership of them. So
whatever you have full ownership of in terms
of your wealth, you will be paying zakat
on that. So these are the requirements for
paying zakat.
Next, how do you calculate your zakat? Okay?
The first thing you do is, let's say
the first time in your life,
you are supposed to mark the 1st date
you meet the minimum amount.
So let's say for example,
let's say Yusuf is
9 years old, right? How old are Yusuf?
You're 9? He's 9. So he's 9. And
let's say he starts programming, let's say he
starts doing some coding, he's making like JavaScript
games and apps and he's selling them on
app store somewhere and he starts making money.
And now he just made $500
and he made another $500
and his friends are buying all these games.
And he's up to,
he's up to $5,300
in his account because he's been selling his
apps.
And he's 14 years old now.
Did he meet the minimum threshold yet? No.
Let's say now
he sells the next app for $500
and he just gets to $5,950.
Is he above?
He's above. The moment he gets above, he's
gonna put that date in his calendar. He's
gonna open up his calendar, he's gonna write
down, this is the first time in my
life I got above Nisab.
I'm almost at $6,000
He's gonna write that date down, the Islamic
date or the whatever the date is, and
now he's gonna wait 1 year
and now he's gonna keep on coding, he's
gonna take some of that money, he's gonna
invest in the stock market and he's gonna
buy
some company, use of what company you're gonna
buy?
I'll advise you, buy Apple. So he's gonna
buy Apple Computers
and all of a sudden that's gonna hopefully
go up. In the next year,
354
days later,
now he's still above 85 grams of gold.
So now let's say he has $9,000 in
his account.
Because it's been 1 year,
he's gonna pay on exactly the same date
of last year, 354
days later, he has to pay his account
2.5%
on whatever money he has in his account.
Is that clear?
That's what's supposed to happen.
Majority of young professionals, they never did that
because they probably were never taught that this
is what you're supposed to do in his
account.
How many of you were not taught this
and you didn't do it?
It's okay.
This is the problem. This is the problem
because zakat education for some reason is either
it's not taught very well
or people don't show up to it and
they should show up to it. So anyways,
that's what's supposed to happen. So after 1
year later year, you pay 2.5% on your
savings. Now let's say you're like, well, you
know what? I don't remember what that date
was. We go back and you check your
bank statements and you say, okay. When was
that date when I started? You say, but
I haven't paid in, like, 2, 3 years.
What do I do? Back pay for those
years and you pay. And you say, well,
you know what? That date that Yusuf first
made his money, he's like, that's not a
very good date. That's like
it's like it would be so much easier
for me to just pick a date that's
like Ramadan the first or, you know, the
day of Eid or the day of Hajj
or something like that. It just it's easier
because Islamic lunar calendar. So you can recalculate
he can recalculate his date by paying early
1 year. So he's like, you know what?
My Zakat date is coming up in 2
months,
but
it's,
the first of Dhul Hijjah.
Right? Hajj is coming up. You know what?
My zakat is due in 2 months, but
I'd rather recalculate my date so every year
I'm just paying on the first of Dhul
Hijjah. So 1 year he just pays early,
and the next year his new date now
is the first of Dhul Hijjah.
Problem solved. And then it's simple, you just
simply keep paying every single year like that
and that solves the problem. Alright? You should
not delay your payment of zakat even a
day because it's like a prayer. Alright? You're
you're sinful if you delay even a day.
But can you pay early?
Can you pray early?
Can you pray before lower time? Can you
be like, you know, 8 AM, I'm gonna
take a nap, let me just pray my
lower right now. Can you do that? No,
you cannot. But can you pay your zakat
early? Yes, you can. If there's an emergency,
disaster, somebody says, listen, we need money, there's
people there's an earthquake that happened somewhere, we
really need some funds right now. So you
know what?
I am a charitable person, I already gave
out a lot of charity,
zakah is coming up, let me give this
with the intention of my zakah. So you
give it with the intention of your zakah,
When your due date comes, you recalculate how
much money did you give out for a
account, add it back to the amount of
money that you have, do the 2.5%.
Were you were you under or you over?
If you were under, you pay the remainder
of your account and your account is fulfilled.
So you can pay early.
Okay? At least like a year early. Don't
pay like 10 I'm paying 10 years early
for zakah, never have to pay for the
next 10 years. Don't do that. Okay? But
like 1 year early, you can pay.
Alright. What types of wealth is zakah due
on? You do not need to pay zakat
on personal items. So like, let's say furniture,
you have sofas in your house,
you have like an Italian,
you know, cross stitched
imported from, like, Sicily,
a sofa that's like $7,000
and you only have $2,000
in your bank account. You're like, man, that's
a $7,000 sofa and $2,000 I'm about to
stop. But you only had I don't know
why you have that sofa anyways. But regardless
of that, that's another counseling issue. But you
do you only have $2,000
in your account? Do you have to pay
this account? No. Because you do not need
to pay this account on your personal items.
Furniture, you don't factor it in. Your clothing,
you've got some really fancy brand clothing, you
don't need to factor it in. Vehicles,
even if hypothetically, okay, hypothetically, you have a
Ferrari,
right? And you only have $4,000 in your,
let's say you have $20,000 in your bank
account and and you have a Ferrari,
you're gonna pay
2.5 percent on your $20,000
you're not gonna factor in your Ferrari.
Why do you have a Ferrari? No idea,
right?
Counseling issue again. But the point is, it
doesn't matter what you own. So if you
own wave runners and jet skis and ATVs
and all sorts of recreational vehicles or whatever
it may be, and you're not trying to
sell them, you're it's really for your own
personal use.
You don't have to factor that in for
Zakkah, all the books that you have. If
you've got a lot of books like me,
weapons, you know, you have like a gun
collection or in the past, people used to
have different weapons. They were very expensive and
all that. You don't have to factor all
those things because they're for your personal use.
You're not selling them. Alright?
But zakat is due on
four things. Number 1, the currency, meaning the
money that you have, a cash, bills, all
of that, and your bank accounts.
Number 2, your merchandise that you have for
sale if you own a business and your
investments
and agricultural products if you're a farmer. Any
farmers in here? No. I've never had a
farmer in a Sakai workshop. So we're gonna
skip that entire part, which is actually, like,
takes about 2 hours to go into detail.
So that's great. Livestock,
again, if you own does anybody own,
40 sheep
by chance? Nobody? Alright. Never had someone. Good.
I'm gonna skip another 2 hours worth of
zakat, so this is gonna become a much
shorter seminar. Because anytime you go and you
study Islamic law in like a seminary or
an Islamic university,
guess what? More than half of zakah is
on agricultural products and livestock because that's what
it used to be in the time of
the prophet, peace be upon. This was a
a major form of their wealth. Now we
can skip that part and only focus on
the first two that is currency and bank
accounts,
merchandise for sale and investments.
That's all that's really relevant today. Alright. So
wealth in the form of money, currency and
accounts, you're gonna go and you're gonna calculate
all the coins and the bills and the
checks that you have written to you and
your bank account, savings accounts, and checking accounts
and everything like that. And you're gonna calculate
all of that, you have to pay as
a guy. Any money that you set aside,
say I'm setting this money aside for marriage.
When I get married, I plan on having
like a $20,000
beach wedding in Santa Barbara
and I put that in a special envelope
and it's under my bed.
That money is reserved for when I get
married.
Too bad, it doesn't matter. You still have
to pay Zakkad on that money. I hear
this all the time, say, but I have
money for school, you know, I have money
that I'm I'm saving up because I wanna
be paying my school fees and I have
so many fees coming up. I understand that,
but that's your money right now and you
haven't spent it yet. You wanna prepay in
advance, prepay the money to the school, it's
not your money anymore. Now you don't have
to pay the sick on it. But if
it belongs to you, you have to pay
on it. If you say, well, I plan
on going for Hajj, I'm saving up for
Hajj and I should be able to go
within the next 9 months, but you don't
know if you're gonna go within the next
9 months. So whatever money you save, you
still have to pay Zakkia on your money
because it's still your money. It doesn't matter
if you've intentionally
you intended to save it. It doesn't matter
if you put it in a safe and
you buried it, you know, underground under your
house, you still have to pay secure that
money.
Business assets.
If you own a business, like, let's say,
Yousef is, coding games,
and he's already coded a few games and
they're for sale and no one has bought
them right now. And those games are listed
for $500 each.
That is merchandise for sale.
He has to pay Zakat on the value
of that because he knows that the value
of that game is probably gonna have a
market value of $500 he needs to sell.
Inventory. If you have inventory, let's say you
have,
you sell products and you have stuff in
the back and it's not for sale right
now, but it's in your warehouse.
And it can be it could be for
sale. You have to pay Saqqan on that.
Raw materials that you have for producing something
that's gonna be for sale, you're supposed to
pay on that as well with few exceptions.
Then this is if you own like a
business.
Receivables and currency. Receivables
are,
you know, oftentimes when you do business,
you sell something to people and you say,
you know what, you can pay me within
30 days or you can pay me within
a week or something like that. You know
this person's gonna be paying you within that
amount of time usually.
So you have to pay on the receivables
because you already sold the product.
So you're not considering it merchandise that you're
gonna be paying Zakkad on, but this person
owes you money, and they're gonna pay you
within a few days.
You have to pay on your receivables.
You also have to pay on the currency
that you have in your bank account. So
let's say Yousef's doing all these pro coding.
Right? So he's got, like, 3 games listed
on his app. So that's $500 each. That's
$1500. He's gonna pay his account on that,
and he's got $6,000 in his bank account
for all the money that he sold. His
business has both of these things. You add
them together and you're gonna be paying Zakat
on both of them.
What he's not gonna pay Zakat, what you're
not gonna pay Zakat if you have a
business.
Fixed assets.
So let's say, Yusuf buys a brand new
laptop to do his coding.
The laptop, let's say he buys a super
crazy expensive laptop. It's like $5,000
and he's got the super mouse and he's
got the big screen and everything. You do
not have to pay Zikka on that because
that is being used
for the business.
It's not something he's selling. So it's it's
it's like personal use, but for the business.
Machinery, you don't need to pay Zikon. Equipment,
you don't need to pay Zikon.
Payables and uncollectible debts, also, you don't need
to pay Zikon on them. So,
you can subtract your payable things you need
to pay. So let's say he bought the
laptop, but he hasn't paid them yet. He's
gonna pay them in in a month, but
he already received the laptop. He has to
pay that. So he can subtract,
that from the amount of his account. Uncollectible
debts. He knows there's a few customers that
won't pay him. They're just they've just been
waiting, waiting, waiting. They're just not paying. They
say, oh, I don't have the money. I
don't know when I'm gonna have the money.
You don't have to pay on those. So
receivables are different from uncollectible or likely uncollectible
debts.
Next category is investments.
So if you purchase anything
with the intention,
primary intention
of eventual resale,
zakat is due.
Right? So let's say for what does that
mean? Like, let's say I buy this phone.
Okay. I buy this laptop. This is for
my personal use. Am I eventually gonna resell
it? Yeah. I mean, when it gets old
and I wanna buy another laptop, I'm gonna
resell it. But what's my primary intention of
buying the laptop?
To resell it or primary intention was to
use it for myself?
Use it for myself.
But if I have a business
and I buy
5 laptops a month
and I use them a little bit, but
I I keep on selling them whenever I
get a chance to people and make good
amount of money from it.
That
is a business that I'm doing.
Every single one of those laptops, every single
one of those phones that I'm buying, I
have to be paying sakan because it's merchandise
and it's business
that I'm that I'm doing. Basically, that's why
I bought it. I bought it to do
business even though I used it a little
bit. My primary intention of buying it was
for resale. So that's what an investment is.
Let's say you buy a vintage car.
Let's say you buy an old Ferrari
from I keep using Ferrari. See, buy an
old Lamborghini, just mix it up. Buy a
Lamborghini in the 19 sixties,
okay, like an old vintage Lamborghini.
And you're like, your intention could potentially be
one of 2 things.
I like vintage Lamborghinis, I like old car,
I know I'm just giving you a hypothetical,
I like newer cars. But anyways, but a
vintage Lamborghini, I like the old style cars,
they're just so cool
and this is the car that I wanna
drive and I work on it every weekend
and I just enjoy that.
Is it personal use or is it investment?
Personal. Personal use, you don't pay Zig on
it. If I switch my intention,
I said, man, these old Lamborghinis, I know
people that will pay
an arm and a leg for this. Gonna
buy I'm gonna buy one of these and
I'm gonna
keep it in my garage, keep it super
clean, keep waxing it and everything and I
have a feeling in 5 years I could
sell this thing for double.
The intention is personal use or investment?
Investment. I need to pay Zakat every year
of those 5 years
on the potential market value. So I go
check, hey, what's what could I possibly get
for it right now if I were to
sell? You gotta pay Zakat on the market
value of that car every single year because
my intention is different. Your intention can be
personal use, your intention can be investment.
And guess what? Allah knows your primary intention.
So you need to figure out what your
real intention is, and then you need to
decide what you're gonna do.
Stocks are in the same category. Stocks are
investments, you buy them. Most people buy stocks
for the purpose
of resend, hoping that the stock goes up
and then they're gonna resell it. So you
gotta pay Zinca on your stocks at the
market value. So you're gonna pay it on
the market value every year
on all of these investments.
Now there's some I'll just mention this. There's
some opinions
which I think are strange. One opinion is
that, they say stocks
are you only pay you pay 10%
of the profit
that you make capital growth that you make
on the stocks.
This is analogous
to farming
because if you had if you were a
farmer, which none of you are, but if
you were a farmer
and you had crops
and your land is naturally irrigated through rain,
which Allah is sending down for you and
you don't need to put any work into
it, you're supposed to pay 10%
of your crops. We're not gonna cover this
today, but I'm just giving as a side
notion. So therefore they say, stocks are like
that. It's they're growing,
like the farm is growing.
I'm like, that's like the worst analogy ever
since a very weak opinion.
I really suggest people never follow that. The
second opinion is
that you pay,
not on the market value of the stock
shares, but you pay as if you're an
owner of that company. So you're saying like,
you know what? If if Yousef buys,
10 shares of Apple Computer,
It's like he's a part owner of Apple
Computer. So what they're gonna do is they're
gonna look at how much cash they have,
how much profit they're making, how many vehicles
they have, how many trucks they own, how
many warehouses they own, and they're gonna look
at which are the segaptible parts of the
business, the non segaptible parts of the business,
and then he's gonna pay S and P's
apart. But in reality, that's not how the
open stock market works.
Stock market generally works. He's not an actual
owner. He owns these shares. Yes. In one
sense, he's like a part owner
of, like, 1 billionth of a company or
something like that. But in reality, he has
no
say in what's really gonna happen in the
business. He has no actual vote. He has
no actual, you know, able to dictate what
happened. So he's not really a partner. So
when it comes to stocks that you're buying
on open market, they should be treated as
merchandise.
If you own a company, like, let's say
you own 10%
of Apple Computers and you're a major shareholder,
you're like Warren Buffett and you go in
and you buy out a company like a
major shareholder and you actually have a real
influence over what happens in the company,
then it makes sense to say I'm an
actual partner and I'm gonna be paying like
an actual partner. That's gonna be in a
different scenario than people who just buy a
few shares,
in the stock market. Okay? And then there's
access restricted investments.
Like for example, if you have a IRA
account,
a individual retirement account, or you have a
401 k account, 403 b account or something
like that,
you have access restrictions on those accounts, which
basically means, well, I can't pull out the
money whenever I want. But the question is,
do you voluntarily
give up your ability to access that money?
Yes. You did for stock benefits.
I'm sorry, for tax benefits.
Did you,
do you
this is the person who is managing your
portfolio
inside the 401 k or the IRA, do
they have the potential
to have access to switching from one stock
to another stock or something like that? Absolutely.
They have access to it. If you needed
incidental access because you got sick or you
needed to buy your first house or something,
When you get let's say you have $300,000
in your 401 k, and I get this
scenario all the time, by the way. K?
I have somebody comes to me and says,
I only have $3,000 in my bank account,
so I can't pay zakat this year. Why?
How much do you have in your 401
k? In my 401 k, I have $900,000,
but I only have $4,000
in my bank account and therefore I cannot
pay zakat. And if I try to pay
zakat, I wouldn't even have enough money to
pay zakat. So therefore I don't have access
to that money so it's as if it's
like it's not mine. I said, let me
tell you something, I know for sure
that if you lost all your money in
your bank account, if you spent all $4,000
in your bank account,
you would not become homeless
because you will get access to your 401
k. It's not like the the government's gonna
be like the financial company's gonna be like,
sorry.
You're gonna be living in a tent
with the $900,000
in your 401 k. That will not happen.
You get access to your 401 k based
on certain criteria and factors in exceptional circumstances
like important medical bills, buying your first house,
switching, transferring over to jobs, doing a rollover,
whatever it may be. So you are still
rich.
This is not an excuse to be like,
well, I didn't have access to the money.
I hear this all the time, I don't
have access to my money. So therefore, I
should not have to pay as a gun.
This is a very weak opinion,
and I don't recommend you. I'm gonna take
questions, y'all. I'm gonna take questions soon. Alright.
So so you still pay and you should
be paying on the market value. Now there's
3 opinions on this. Number 1 is that
you can deduct the potential penalties that you'd
have to deduct if you're gonna access it.
My view is that you shouldn't do it.
Or I can I there's a I word
article on on my website, ask the scholars.com,
explains in more detail? The second is that
you can deduct the, potential tax that you
would have to be paying on it.
But my view also is, that you should
not be doing that because,
your growth is not gonna be based upon
those things.
Alright. Anyways,
then you have gold and silver.
So gold and silver,
people used to have gold coins and gold
bars and still do maybe sometimes. You gotta
pay a discount on that.
But
what about jewelry?
What about jewelry that, you know, you're wearing?
Again, men cannot wear gold by the way,
so it should not be for men. But,
for for women in particular, there are scholars
have differed. There are 3 main views and
they're all
they're all pretty strong views,
in Islam. One of them is you have
to pay zakat on all your jewelry every
single year. This is the Hanafi madham position.
2nd view is that you do not need
to pay zakat on any of your jewelry
and this is the shepard position
and and some other scholars.
And then there's a 3rd view which basically
says, if you're using that gold regularly throughout
the year,
you
don't need to pay zakanin because it's like
it's for personal use.
But if you're sitting with all this gold
and it's sitting in a safe deposit box
and it's like your emergency fund in case
you need to sell it or something like
that, then you need to pay Zakat on
that because it's more like a savings
than it is a personal use. You're like,
you know, this was passed down to me
from my my grandmother,
from her great grandmother, and I'm planning on
passing it down to my grandkids.
But
before I become homeless and have to sleep
in a tent, yeah, I would sell this
gold.
That is like your savings. Right? So this
is the 3rd view.
I slightly lean towards the 3rd view
theoretically, like, intellectually,
But I think if you're well off, it's
safer to just pay on the jewelry every
single year.
It's just a safer thing to do, and
it's better for the poor. And you're supposed
to be giving more charity than just a
cat anyways.
So hopefully, you're giving enough charity that offsets
the amount of your children. Okay?
That's my general general view.
Alright. Next is debts and loans. So long
term debt, if you debt means you owe
somebody money
and loan is I'm using it this way.
Loan is when you loan somebody money. They
borrow money from you, so you gave it
to them.
So long term debts are not subtracted from
Sakaal. So if you have $10,000
in your bank
and
you
are,
leasing a car or you're financing a car,
let's say, and you're paying it off and
you still have $30,000
to pay off on your car,
Can you be like, you know what? While
I have $10,000 in my bank and I'm
minus
$30,000 off my car,
can you people please give me zakat so
I can pay off my car on my
Mercedes? No. You cannot receive zakat to pay
off your Mercedes
just because you have a loan
a a a debt on it. Right? So
you cannot subtract long term debt,
not student loans and not
vehicle loans and not home loans and all
of those other things. The only debt that
you can subtract
is debt that is due right now. So
if you had a car payment that was
due yesterday and you haven't mailed the check
for it yet, you subtract that specific payment
for the month that was due right now.
So if it's due right now and you're
intending to pay it off, then you can
subtract it. That's the way it works. When
it comes to loans, if you loan somebody
money, let's say,
Maria wants to start her own business as
well. She wants to sell art online. And
she says, you know what,
dad, I need,
I need a $1,000
to start my business. So I said, okay.
I'll loan you this $1,000.
Now if I give her this loan, okay,
the question is, does she pay Zakat on
it
or do I pay Zakat on it?
So the question is gonna be who pays
Zakat on it and how and when? So
the thing is if I can collect this
money back
at any time
because I know she didn't spend the money
yet and I'm like, I need the money
back right now. Sorry, Donner. Taking it back
from you.
I will be paying Ziga on it.
If I cannot collect it because she put
the money into her website and now she
doesn't even have the money, and I'm like,
can I get my $1,000 back? She said,
sorry, baba. Didn't sell any art today, and
I don't have any money
and sales are just not doing well. I
don't have access to that money. So I
loan her money
out of goodwill.
Obviously, I would not loan my own daughter
money to give it to her. But if
I give it out of my goodwill, and
then what happens is I'm not collecting interest
on it, and let's say she pays me
back 5 years later. I was trying to
do an act of charity. I was trying
to do something good, but now I'm being
penalized for having to pay 2.5%
every single year, and I don't get access
to invest that amount of money myself and
break that 2.5%
threshold for myself so I'm not going down
in money, that wouldn't be fair. So there
are 3 scholarly opinions on
debts and loans on whether they're to be
paid or not. This is my view, and
this is a view that I feel strongly
about because I think it would not be
fair if you had to pay,
Saqqa on the loans that you gave out
that you cannot recollect right now,
but you're having to pay Saqqa on them.
The guy's like, pay you later, I'll pay
you, you know, when I get the money,
I don't know when I'm gonna get the
money, that wouldn't be fair. So that's when
it comes to debts and loans.
Distribution of zakat, who can zakat be given
to? The eligible recipients of zakat,
number 1, the poor and needy. So who
are the poor and needy? Generally, people who
are below,
below the minimum amount threshold.
Those are people who can receive zakat, or
you can actually look at the,
poverty
line. So let me give you some stats
on the poverty line right
here. In the United States, the family poverty
threshold in 2023
was
$13,788
per year for a single individual under the
age of 65.
$27,479
for a family of 4 with 2 children
under the age of 18. Alright. So this
is just approximate poverty guidelines. If somebody's living
in there, most likely they're qualified to receive
sukha even if for some reason they're above
nisav.
If they're below nisav, but they're way above
this, you probably wanna prioritize giving the zakat
to people who are both below nisav and
below this poverty threshold if you have the
ability
to distribute it to them.
Number 2, people employed to collect or distribute
zakat. This was
mostly during the time,
when there's a Khalifa and there's an Islamic
state, but I'm not gonna get into the
details of this,
because this could potentially be abused by saying,
you know what? I will redistribute
zakat on your behalf. You can give it
to me and I have some friends,
but I'm gonna take my 20% cut because
according to the Quran, I am employed
to distribute zakat on your behalf. So you
gotta be very careful about that, but I
won't go into too many details.
Number 3, people whose hearts need to be
softened towards Islam. This was
in the beginning of Islam during the time
of the prophet, peace be upon him, when
they would give sakah to people who were
either enemies of Islam or new to Islam,
and they needed to kind of, you know,
be
pacified
in their hearts because they were wavering because
Islam was not very powerful. When Umrah bin
Khattab became Khalifa,
he said this doesn't apply anymore in our
circumstances
in our time. So majority of scholars went
with this opinion, but it can potentially, you
know, play a role.
Number 4, slaves who are able to purchase
their freedom. Does anybody know any slaves by
chance?
No. So we don't know any slaves, so
this doesn't really apply today. Number 5, people
who are in debt.
In debt for their Mercedes?
No. People who are actually in debt, like,
they really need to pay off their debts,
those and they need to pay it off
now. Those people can receive zakat because what
you do is you look at how much
money you have, you subtract the amount of
debt you have, you're eligible for zakat.
Number 7, for the defense of Islam and
Muslims. So to,
actively support,
like jihad or something like that in the
past. Now it's hard to make that determination
nowadays,
but that's the way it was, like soldiers
and stuff like that fighting for the cause
of Islam. And number 8, someone who doesn't
have access to their wealth, like someone a
a traveler that is stranded
and they have money, but they don't have
access to their money because they're in a
foreign land. Right? That rarely applies today. There's
always,
what does that call it? MoneyGram
and,
what's the other thing where you send money?
Western Union. Western Union. Yeah. Western Union. And
now you got your cryptocurrency. You got so
many other ways to transfer money over. Alright.
Distribution of Zakah.
You cannot
give your Zakah
to someone who possesses
the nisav unless they're really in need. Let's
say they have, like,
27 children. Right? And
like, I think Sheikh Mohammed,
his his family actually had 27 children. So
it's pretty interesting. But anyway or like we
get more than 27. Anyways,
the minimum amount if they have above it,
you can't you're not supposed to give it
to them. So if they're well off, you
can't give it to them. I just had
somebody ask me recently, like, literally yesterday, this
was a question.
So you know what? I wanna give my
zakat to somebody and she's really poor and
she just doesn't have any money and she's
struggling. Can I give my zakat?
But
she does have, like, an entire safe deposit
box full of jewelry, but she's saving that
for her children and she she doesn't want
to spend any of that. What's the answer?
No. No. You cannot. I'm sorry. As as
sentimental as that jewelry is,
she needs to sell some of that jewelry
and take care of her own needs. Right?
You can't imagine someone like homeless in a
tent and sitting there and they're like, but
this jewelry
is gonna be going to my grandchildren. I
know it's sentimental, but no, that's not the
way it works.
Alright.
You cannot distribute zakat to another cause even
if it's on behalf of the poor. So
the Hanafi position,
which I I think is a safer view
to try your best to follow,
even if it's not intellectually the strongest position
is, you're supposed to make sure that money
goes to the poor and not a cause
for the poor. So for example, say we're
building a hospital
for poor people and poor people will benefit
from the hospital. But what if rich people
also benefit from the hospital? You can't do
that.
Also, let's say say we only allow poor
people to come into the hospital. Okay. I
get it, but you spent $10,000,000
building the hospital for poor people.
If you would have distributed that $10,000,000
to the people themselves,
would they have waited for the hospital to
be built or they would have bought food
for their family? They would have gotten, you
know, started a business. They would have done
something right now with that money. So the
general principle which should be followed,
it's not a strict strict principle,
but let's just say it's a general principle
is that you're supposed to kind of
give your money into the hand of that
person
at some capacity.
Like, it should reach them directly rather than
indirectly. So you don't use your zakah to
build roads and you're like, you know, the
poor people will benefit from this freeway
connecting to cities.
I know it'll benefit them. Yeah. It'll benefit
them, but that's not the way that zakah
is supposed to be working. You cannot give
zakah to non Muslims because they don't pay
they don't pay it either.
You cannot give zakah for something where any
benefit comes back to you. So if you
give zakah to the masjid and then the
masjid has air conditioning on, and then you
benefit from the air conditioning, you're giving it
back to yourself. You cannot give zakah you
say, you know what? There's this guy who
works for me. Let's say let's say Yusuf,
you know, is making
is is working for a computer company and
he's poor. And they say, you know what?
I know Yusuf is poor. I'm gonna pay
his salary
from my zakat money. You can't do that
because he's working for you. You can't be
like he's gonna fix my wall. He's gonna
he's gonna fix my toilet at home and
I'm gonna pay him zakat money. No, you
took a benefit from that. So you cannot
have any benefit returning back to you. Now
there's another scenario that's
we gotta be a little bit careful about.
Let's say I own a pharmacy
and I sell medicine.
And I say, you know what? I know
there's a lot of poor people who who
need medicine, and they really need they they
if I gave them money, they would definitely
buy some medicine. So you say, you know
what? You come to my pharmacy,
and I will use my zakkam money to
buy the medicine and give you the medicine
that you need.
Allowed or not allowed?
Not allowed.
Why is it not allowed?
One simple twist here.
Because you're buying the medicine from my pharmacy
and I you're I'm locking you into buying
it from me.
If I gave you the money, so you
could buy it from anywhere you want. And
so you know what, the other pharmacy it's
half price.
No, but I'm I'm using my zakat to
buy medicine for you.
What happened? You got a personal benefit in
some, there's a conflict of interest.
It's very important for Zakkah Organizations
in particular to eliminate
conflict of interest whenever they can, because it's
very easy to sometimes accidentally get locked into
a conflict of interest. Let's say for example,
I'm teaching Islamic classes. Let's say I take
this zakat seminar and I put it onto,
Mustafa Islamic University online.
And I say, you know, I know I'm
selling it for $10 and I know there's
some of this, I cannot afford it. So
don't worry,
I've collected zakat for people who are redistributing
and I will use zakat funds to help
pay for the course so that you can
learn about zakat because that's a need in
your life. But what am I doing? I'm
locking them into only accessing my course,
not anyone else's course. Someone else could be
selling the same zakat course for $10 or
for $5 or $20, better quality, whatever it
is. I cannot
have this conflict of interest where I'm locking
them in with my own zakat.
And that's what we need to be careful,
okay? Because this happens sometimes, sometimes purposely, and
sometimes organizations will accidentally
do it do it without realizing that they're
doing it. Next, you cannot give zakat to
a person who's capable of working, but doesn't
wanna do it out of laziness. To a
person who's literally, they could just go and
find a job, but they're like, you know
what?
It's just so much more convenient to watch
Netflix all day long.
No. You don't get zakat.
You need to get out there and you
need to go get a job. People who
are lazy
do not receive zakat and this is this
is not like some brand, but this is
not some new thing I made up. This
is explicitly
mentioned in books written
1300 years ago.
All of them. It says straight up, anyone
who's lazy doesn't wanna go out and get
a job, do not give them your zakat.
I was like, man, that's awesome.
Like, Imam Abu Dhabi was writing this because
they had this problem. This is a this
is a universal problem that used to happen.
Lastly, to pay for government taxes,
you cannot say I pay my taxes and
therefore I don't have to pay zakat. I've
heard this, I've even heard some guy who
is claiming to be a scholar,
saying that this is his opinion. Anyways,
why?
Because Zakat your your taxes
are not being spent for the most part
on Zakat eligible categories.
So, yeah, it's going to is your Zakat
is your are your taxes
going to
non Muslims who are Muslims who are in
need?
What's the percentage?
Like almost nothing, right? So therefore paying your
taxes has nothing to do with zakah. You
still have to pay zakah. As another I'll
mention one more point here. Should you claim
a tax,
what do they call it? Tax break?
Yeah. Should you claim tax breaks for giving
Zakat?
Absolutely. Why in the world would you not?
So if you give your zakah, you should
claim it on your tax return and say,
look, I gave this much charitable donation to
a tax deduction. You should definitely
use
your zakah as tax deductions unless you gave
it in cash, you know, or for whatever
reason. So you should. There's nothing wrong with
that. Now if you wanna be extra pious,
you can say the tax deduction money that
I got, I'm gonna redistribute that back and
share it. But as long as the reason
why you gave zakah was not to get
the tax deduction, the tax deduction is
incidental
to your purpose behind why you gave Zakat.
There's nothing wrong even you keeping that money.
Okay?
What else do I have? Distribution.
I'll go through this really quickly.
You can distribute to any one of these
categories however you want. Family is a priority.
So if you have family members
who are poor,
except your parents and grandparents and your children
and grandchildren. You cannot give zakat to them.
Why? Because you're obligated to spend on them.
So if they're if they're in need, so
I get asked this all the time, it's
like, do I have to spend on my
parents?
Let me clarify the answer for you.
Only if they're in need. Be like, you
know what, my dad wants to buy a
Ferrari,
keep keep using Ferraris. Somebody give me another
car.
Mustang? Okay. My dad wants to buy a
Mustang
and, you know,
he wants me to buy it for him.
And, like, I'm still trying to build up
my wealth and everything, and he's got enough
money, but he wants me to buy it
for him.
Do I have an obligation to buy it
for him? No. I don't have an obligation.
But if my dad becomes poor
and he can barely pay his
expenses,
I have an obligation
I must pay for him and I cannot
use the account.
But my brother,
on the other hand,
he can receive zakat
because I don't have an obligation to take
care of him, unless, you know, it's like
a much smaller
obligation of like, you're supposed to take care
of your family if there are need, but
I'm allowed to give my zakat to him
or my sister or whatever it may be.
So family is number one priority. You can
give your zakat to them.
And then giving this,
zakat in your local area is also a
priority unless there's emergency elsewhere.
You can give it directly or you could
give it to someone to give it to
them on on your behalf. So there's organizations
that do that or individuals that do that.
When you give your zakat, very important,
you have to have the intention that it's
zakah.
You can't be like, you know what, hey,
man, I just wanted to help you out,
here's $100 to charity. And then 1 month
later, you're like, oh man, my zakah is
due.
I should go back and backdate and count
that $100 I gave to that person. You
cannot backdate your intention.
So
whenever you give zakat, you have to have
the intention of giving your zakat.
You can pay in advance, but you can't
backdate it.
You are not required to notify the person
that you're giving it to that the money
is zakat. Let's say somebody you know that
they're they're not well off and they need
the money,
And you there you're like, if you told
them this is zakah, they would feel embarrassed.
They're like, you know, it it kind of
feels a little bit it's like messes with
your honor, you know, may Allah protect us
from being in that situation.
So
you don't have to tell them it's zakah,
but you need to have the intention in
your heart that this is zakah. And then
you say, you know, I just wanted to
give you this gift and you give them
like a a gift card where they could
buy whatever they need, a grocery store gift
card or something like that. They say, I
just,
you know, you've been a really good friend
for so many years. I just wanted to
give you this gift.
And you don't have to tell him it's
zakah, but in your heart, you knew it
was zakah and you knew they're eligible, that
counts as your zakah.
You can distribute zakah in any form of
wealth as long as it's truly helpful for
the individual. So that's the the medicine example
that I give. Right? So when you were
you were thinking about,
you know, somebody needs this medicine, you can
give them money, you can give them medicine
and you're like, this medicine is really required
for them. You can go ahead and give
them the medicine. What you can't do is
be like, you know what?
I have this really nice laptop
that's 2 years old and I've been wanting
to get rid of it for quite a
while now and selling it on,
Craigslist is gonna take me like a month.
It has a value about $600.
I know this other guy has a need
for a laptop. Let me just go ahead
and give him the laptop. Now how much
if you were to hand the person $600,
would they have bought this laptop or not?
Probably not. That's your that's your
criteria.
If you were to handed
$30
for
this to this person and you know that
they need this medicine and they would have
went and bought this medicine because they're in
pain, they need this,
then you can give them the medicine.
If you know that if you handed them
the money,
assuming that they're a responsible person, they would
have gone and bought the medicine, you can
give it to them. Assuming that they wouldn't,
then you don't give them that specific thing.
Right? And that's why sometimes it comes back
down to if they're a responsible
person. So a lot of people who are
in need, they may not be so responsible.
If you hand them $1,000
and they need to pay off their utility
bill and they need to pay their rent
and they need to buy some medicine, they
need to buy some food, they
may go out and
blow that money before they even pay their
bills. And that's a problem.
In that situation, and you know that that
they they're they're not responsible with money, can
you pay their other needed expenses for them?
Absolutely. Pay their rent, pay their utility bill,
buy the medicine, buy them whatever they need
so that they're not wasting that money. What
you don't do is you don't take it
one step further and you start giving them
your own laptop. You'd be like, you know
what? I need to get rid of this
$600, I don't need to put on Craigslist,
I don't need to put on OfferUp or
anything like that. No, don't do that personal
benefit thing and don't be like, you know
what? I really think you need,
I don't know what do people need.
Can't even think of a scenario right now.
You buy them something else that they don't
need. Oh, I think, you know, it would
be really nice if you had this drone,
you know, it'll it'll like drone cameras, something
like that. And you're like this person, it
would be really nice that it'll de stress
them when they play around with the drone.
They don't need that. So you can only
give them
non money
if they it will truly be helpful for
that individual. Okay? So that's the criteria and,
you can pay zakat in increments
and I spelled the increments wrong. I just
realized that right now. You can pay zakat
in increments,
but
here's the catch. A lot of people do
this. So they will pay I'll pay your
rent every month,
but what they do is they wait until
their zakat is due. And they're like, I
have $4,000 zakat due. Okay. What I'm gonna
do is I'm gonna start paying off your
rent every month
until it's paid off, let's say, $1,000 a
month.
Your zakat is 4 months late by the
time you paid off the rent. What you
should do
is you should be paying 4 months before
your due date. So by the time your
due date comes, you've paid off all yours
account
by your due date. So just make sure
you don't make that mistake and you're paying
late. So let's take a simple example, and
this is the last slide. Your assets and
your liabilities. Let's say you have $500 under
your bed. You count it as account. You
have $100 in your wallet. Look into it.
You have $10,000
in your checking account. Your market value of
your stocks is $5,000.
The jewelry that you bought for sale or
sitting in your, you know, safety deposit box
is $1,000.
Khalid, your friend owes you $2,000
and you can collect it from him any
any time. Your liabilities, you owe you owe
John $5,000.
Your past due rent is $1,000.
Your electricity bill is $100 and it's been
billed already, but you haven't paid it. You
have gold value
gold value is $2,000 per ounce. You're determining
what the Nissav is. So 6 let's say
about $6,000.
Subtotal,
$12,500.
You multiply by 2.5%.
In a calculator, just for those of you
who are mathematically challenged, you do times 0.025
or you do divided by 40,
and it'll give you
the number of $312.50.
That's the amount of zakat that's due. That's
how you calculate your zakah,
and I'll take questions now. Insha'Allah.
Yes.
Oh. Oh. Oh. No. No. So Nissab is
the 85 grams of gold, about $6,000.
The
$13,000 was the United States poverty rate for
an individual in 2023.
I was just mentioning that as who can
receive Zakat. It's not about who's paying Zakat.
Okay.
Yousef, question. I have 2 questions. You have
2 questions. Okay.
You need about $6,000
to pay this account.
That's
a great question, Youss. So a few months
later, if you had the $6,000 and a
few months later, you lose all of that
money. Right? Let's say you go all the
way down to $1,000,
you keep waiting, waiting, waiting until your zakah
due date comes,
354 days later. If you get back above
$6,000
again, you're still gonna pay zakah.
If you're still below that amount after your
zakat due date comes, if you're still below
$6,000,
then you're not paying zakat.
Great question. Nice. Yes.
I don't know.
Yeah.
Would you describe HSA as, investments? Like a
savings account? I have I forgot how they
function, so I have to look look into
them again. How do they function in a
nutshell?
Yeah. Yeah. Okay. Yeah. So, yeah, you you
would count, that as a and you could
potentially pull it out. Right? And you could
be using it for yeah. So you will
count that as a a saving, savings. Yeah.
HSA.
Yes.
What about?
What about real estate? Oh, yeah. I do
cover I actually about real estate. Yeah. I
forgot to cover real estate. Let me cover
real estate real quick because I forgot. So
real estate in a nutshell is your personal
property that you own and you're living in,
you don't pay a sick on it. Your
rental property that you own and you're renting
it out, you also don't pay Zikka on
the property.
The money's gonna come into your bank account
that you're renting it out. You're gonna be
paying your expenses from, let's say, the same
bank account, whatever's left in there, you're paying
Zikka on the money that's left over.
The real estate that you do have to
pay on
is if you flip homes. So if you
buy homes and then you sell them and
this is your business and this is what
you do, and the primary intention of buying
that property was to sell it
in, let's say, the short term,
then you will be paying on the entire
market value of the property. The same thing
applies to land.
The same thing applies to burial plots. The
same thing applies to vacation homes, etcetera, etcetera,
across the board.
Are there situations
where, like,
there's difference
for example, if someone has
lots of forms, like, let's say, 10 homes,
and they're investing in the rest of their
work and real estate,
and then they only have, like, $10,000
Yeah. Would they not have to pay Yeah.
So I know it seems almost like a
zakash shelter. So let's say somebody owns 10
properties
and,
they only have $10,000 in their account and
they're like, well, they keep on investing in
these things. Technically, it's almost like a zakash
shelter because,
so real estate has the potential to fluctuate
between the two intentions. If you remember my
vintage Ferrari example, it's the same thing.
So,
you buy it for the purpose of renting
out, so it's like
it's like a revenue producing
business. It's like machinery that you buy for
your business. Right? So someone can have a
massive business. They keep on buying these massive
machines, 1,000,000 of dollars, but they're not paying
zigong on it because it's there to, you
you know,
make their products. This is what a lot
of companies do like Tesla. One of the
one of the things they did was they
invested so much of their money
in infrastructure,
developing supercharging stations all around the world.
So when they look at their balance sheet,
they're like, they don't seem like they have
much money, but they're putting all their money
into these future assets
that are gonna be there. Same thing applies
to Amazon did the same thing. Right? So
a lot of companies do that on purpose.
So if somebody's doing that with real estate,
with the intention of avoiding Zakkiah,
you know, you should be giving more. And
if you're so wealthy, you should be giving
more.
Right? But technically, from a technical perspective, it's
like, yeah, it's not dual dual real estate
unless you're flipping the homes or you're selling
the homes for the market value.
Yeah.
If you sell them? I don't understand the
question.
$1,000 worth of stocks. Market value of the
stocks is $1,000. And then I'm old and
I sell
it to pay this account. Oh, and you
sell it to pay this account. Yeah. Yes.
Whatever whatever's left.
Let's say you sell it and you have
the you have transaction fee, you have tax
or whatever. Let's say the tax has been
built immediately,
hypothetically.
On the spot, whatever money you have left,
you calculate the stocks that you didn't sell,
market value, the stocks that you did sell,
cash value, and then you do the 2.5%
of that.
Okay. Yes.
If you own gas station, for instance, do
you pay on the fuel and the pumps
and the inventory and the convenience store and
then the inventory and storage?
Yeah. So let's say you own a gas
station. Yeah. So the fuel that you own
is something you're planning on selling, and you
if you already bought it and purchased it,
you're gonna be paying on that. Yes. And
the convenience store, all the stuff you have
in the storage, hopefully, halal stuff, then yes.
Yeah. And then do you pay on the
market value cost of the station?
No. No. You don't have to pay on
the market value cost of the station. In
terms of,
patents and goodwill on potential station and all
that stuff, no. Because that's the building, and
then you have a brand. You don't have
to factor in the brand and all that
stuff.
So you mean if you have stocks and
right before your is due, the stocks fluctuate
down below the meson value
Or with that year, Or with that yearly,
they will be Yeah. So stocks will always
be fluctuating. Right? Let's say you have $10,000
of stocks
a year ago. In the middle of the
year, it went down to $3,000 At the
end of the year, it went back up
to $12,000.
You're gonna pay zakah on $12,000.
If it went down at the end of
the year to $3,000, you're not paying zakah.
If it went down to $9,000,
you're paying zakah only on $9,000. You're paying
zakah on the end amount. So that was
when you're having the low for 1 year,
just
So that was a year, have you developed
a link for when your tools doesn't apply
to that? This is the common question that
people get confused about all the time. So
they say, zakah is due on money that
you've had for a year, and the answer
is no.
Let me rephrase it.
Zakah
is due
on your money
if you've been rich for a year.
Did that rephrase it for you? Exactly. So
basically, 1 year ago, if you're above Nisab,
now if you're above nissau, you're paying zakat
on what you have now, not on what
you've had the entire time.
Other questions? Yes.
What's an example of uncollectible
debt?
What's an example of what?
Uncollectible
debt. Uncollectible debt. So let's say,
you sold something and somebody owes you this
money,
and you're like, okay.
You can pay me in a month. Month
comes by and you ask them, hey. It's
been a month. Are you paying me? Oh,
I don't have the money. Next month, can
you pay me now? I don't have the
money. When will you have the money? I
don't know. That's uncollectible debt.
Yeah.
Yeah. So when it comes to,
homes or when it comes to basically anytime
you're gonna get a giant lump sum of
money for some reason, like, let's say you
sell a home.
You sell a home and you're planning on
buying another home in 6 months. Let's say
you're doing a 1031 exchange or something like
that. So you're gonna have this lump sum
sitting in cash. And if your zakat time
comes and you're like, you know what?
When I had the home, I didn't have
to pay zakat on it. Now that I
just sold it and I'm sitting on cash,
but I'm looking for another house to buy
within a few months,
I'm gonna have to pay zakan this massive
amount of cash.
In this situation,
what you can do
is you calculate what's called a separate haul
for that amount of money. Haul means passage
of an entire lunar year.
So because this is one rare lump sum
of money that just came in and got
converted for you,
you will calculate a separate
year, 354
day lunar year for this amount of money.
So like, in the example of the home
loan you're talking about, let's say you get
$200,000
and you know this money is going specifically
for something.
That lump sum $200,000,
let's say you have $87,000
in your bank account, and then you get
a let's say your family gives you a
lump sum of $200,000
to buy a home, and you need to
look for that home. It's gonna take you
3 months, and your zakah is coming up.
Calculate that $200,000
lump sum that they gave you as having
its own 354
day lunar year period.
And if it hasn't passed on it yet,
if you spend that into a home, then
you're not gonna have to pay a second
on that money. Okay?
Yusuf. Go ahead.
One more question.
Great question, actually. So it's a 2 year
old kid who has $6,000, does he need
to pay his account? So according to the
Hanafi school, he does not. According to all
3 other schools, he needs to pay his
account on that. I actually lean towards the
opinion of the Hanafi school where he does
not need to pay his account on that
because it'll keep eating up his wealth.
However, I'm really glad you brought this up,
but
what a lot of people do
is they'll put money into their child's account.
They'll they'll put money into an account and
they put their kid's name on it and
they say, you know what, here's $50,000
and I put Mariam and Youssef's name on
it too, and he's got my name on
it. They'd be like, this is their money,
I intended that this is this money belongs
to them. And therefore,
according to this view, I do not need
to pay Saigon this money because it's their
money, it's not my money. Here's the simple
test,
if
I am in need
and something happens like I absolutely need this
money, can I withdraw this money and be
like, sorry kids, I love you so much,
but I'm taking the $50,000
Could I do that legally?
If I could do that legally,
then it's my money,
It's not their money and I have to
pay sick on it. If I cannot legally
do that because I actually have a trust
set up and there's a there's a guardian
over this money and I cannot touch this
money at all because it doesn't belong to
me legally,
then I don't need to pay sick on
it. Okay? So there's a little trick that
a lot of people do. They're like, this
money has been reserved for my grandkids,
doesn't belong to me. It's like an envelope
sitting, you know, in a drawer somewhere like
$500,000.
No. That's your money. If you needed money
if you have the intention,
intention does not matter when it comes to
money. Let me just explain that very clear.
Intention doesn't matter when it comes to money.
It's like marriage and divorce. Intention doesn't matter.
What matters is contracts. Your intention doesn't matter.
If you go into business and you have
a contract with someone, you're you'd be like,
I signed this contract, but my intention was
not to actually abide by these terms. No
one cares about your deal. That's what the
contract says. You have to follow the contract.
When it comes to the zakat, it's the
same thing. If the money belongs to you,
your intention does not matter. If it belongs
to someone else, your intention doesn't matter. What
matters is the actual ownership of it. Okay?
You had a question?
He's
unlimited
access to me. So
So the example you gave for someone who
has a large amount of 401 k Yeah.
But a small amount in their just regular,
like, liquid funds.
Is the recommendation
because the reality is although
the money is accessible to them in
in time of need,
if they were to access it currently to
pay the the account, it would pay very
heavy Absolutely.
So what is the recommendation? The record I
get this question all the time. The recommendation
is if you have so much money money
in your 401 k or your IRA
and you don't have enough money in your
checking account to pay off the zakat,
stop putting so much money into your 401
k, don't max it every single year. You
have to like stop putting so much money
in there and put money in your checking
account so you can actually pay off your
zakah. Now if 1 year or 2 years
you didn't know this and
you are delaying your zakah
because you're gonna be heavily, heavily penalized,
keep a track of that. And next year,
stop putting so much money in there and
back pay your zakah. You have a genuine
reason for delaying your zakah payment.
But if this continues perpetually, this happens to
a lot of people, they're like, but I
can never pay off my retirement account because
I don't have enough money. Stop putting so
much money into your retirement account. The perfect
example is like this. Let's say somebody
every year, they're they're putting money into a
safe
and they lock it and they dig underneath
their backyard and they like bury it all
the way down in like under a bomb
shelter or something. And they're like, it's so
hard for me to get that money out.
And every year I keep putting money, I
don't have money to pay my I said,
guys, it's so hard for me to get
it out. It's like stop bearing so much
money then. Bury the amount of money that
you'd be able to pay off. Right? So
that's that's what it's supposed to be done,
inshallah. And for that case, you have a
legitimate reason for delaying your zakat until you
readjust the amount that you're putting because it's
common problem. Yeah.
So just talking about that scenario, like, for
for a 4 zero one k, like, say,
for example, I get this doubled or tripled.
Now you look at your checking account, you
don't have those funds.
Now do you try to liquidate any assets?
Or So when it comes to 4 zero
one k, let's say it massively
tripled whatever it would be, try to liquidate
other assets to pay off your 401 k,
to to pay off your as much as
possible.
If it's really, really challenging, they're like, you
know what? We're gonna charge you 40% penalty
or whatever maybe or something like that. Try
to borrow money from your friends and family
and say, listen, I wanna borrow money from
you. I make good amount of money. Look
how much money I have in my 401
k. I'm a safe investment, you know? Just
let me borrow the money so I could
pay off my zakat
and then keep on trying to pay all
that money back as soon as possible. Right?
As you know, one person, subhanahu, doctor Mazam
al Siddiq, he's one of the senior scholars,
he he gets questions like this. And one
day, I was sitting in his office, he's
a very funny guy, he has a very
good sense of humor, If you know him
on a personal level.
So he said, he said, sometimes people come
to me with zakat questions
and they explain
zakat in such a way
that they're like, you know, but I have
so much money in my 401 k and
it's gonna cost so much, like they they
present themselves like you start feeling sorry for
them as if as if you wanna give
your zakat to them, you know, like they're
like, but it's so much money, it's zakat.
And then he's like he was like one
day, he's like, I thought I was like
I got so frustrated with one person.
He's like, I'm like, you know he's like,
you know what you should do? So the
best solution for you is you should make
dua to Allah not test you with so
much money.
That's that's your solution. Allah is giving you
so much money, it's bothering you so much
that you have so much zakat, just ask
Allah to give you less money, so you
have to pay less zakah and you feel
better about yourself.
And this is like just just be cautious
about that. Don't end up becoming one of
those people who's like, but it's so much
zakah.
That's because you have so much money. That's
why you have so much zakah to pay.
You know, hamdulah.
Yeah. Question.
So if you own a home and you're
living in it and the home has built
up equity because
the value of the home has gone up,
do you pay zakat on that or is
it like similar to the Ferrari example? Similar
to so if you own a home even
it's building up equity, you're not paying on
your personal home. Okay. Got it. Unless you
bought it with the intention of resale, like
quick resale. Yep. Yes.
Good.
Great question. Great question. So
like Yusef's question. So if the money goes
down below $6,000
and then on your zakat due date, it
doesn't go back above the nissab. It's still
below 6,000.
And then you wait, like, another
6 months and then it finally gets back
above Nissab. Do you pay zakat immediately or
do you get another whole year before you
pay your zakat? You get another whole year.
So the the the the point is that
you're supposed to have enough money where you
get an opportunity of a year to be
investing your money. So that's it's your sakat
is not eating up. So this is mercy
from Allah. So, yeah, you you mark a
new day, and you have another whole year
to wait to see if you're still above
missa.
K?
Yes.
This is some 5 things advice if I'm
missing something so effective at the end of
the year. Sorry. Repeat that again. If you
if you file their taxes Yeah. Like, so
this is your this is part of what
you can have for the base account.
And if you add to it the, non
taxable assets that you have and you do
2.5%,
You're saying, paying your taxes?
No. So basically You're saying deducting your taxes
that are coming up?
No. Like like, let's figure out the amount
of money, the taxable time. No. Is the
eligible money that you have? Is the eligible
money and taxable money is different because taxes
are income and zakai savings.
No. No. Not at all. Because the amount
that you pay your taxes
on is the amount that you made. It
doesn't matter how much you have left in
the bank, and it doesn't calculate previous years.
Your taxes don't consider previous years that have
been sitting in your bank account, and your
taxes don't consider how much money you spent.
So taxes are completely different from Sakai calculations.
They almost have nothing to do with with
each other. The only thing you can talk
about taxes is
that if at the end of the year,
your tax season's coming up and your taxes
are due, but you haven't paid them, but
you know you're gonna have to pay them,
you can subtract them if you can calculate
exactly what they are because they've already been
billed. Technically, you owe the government. You can
subtract that from your amount
when calculating your final amount of discount.
Okay? Yes.
Yeah. So stocks which are a part of
your compensation, if they're vested, you have to
pay zig on them. If they're unvested, you
don't need to pay zig on them. So
vested mean unvested means that if you leave
the company right now, you will not get
those stocks. So they don't belong to you.
If they're vested,
you they belong to you. So you have
to pay on them because they're your money.
Yeah.
Okay. So how do you figure out if
someone is really in need? How many questions
do you ask them? You basically use your
best judgment by neither asking too much
nor investigating
too little.
There's no formula for it. You just kind
of you kind of figure, you know, just
look around what kind of car do they
drive, what kind of you ask maybe a
few of their friends, you know, what do
they have a job? What kind of family
do they have? What does it seem like?
Do they seem like they're genuinely in need?
You know, if they're driving, you know, some
expensive car or they're like, you know, you
see that you see that they have a
lot of money for some reason, then you'd
be like, suspicious.
Right? So,
you know, usually,
if they appear to be at some level
to be in need, you can you can
safely assume for the most part that it's
okay to give it to them.
Yes.
That's the opinion of some scholars. My opinion
is that you don't subtract the fees, that
you would take it out today because you're
probably not gonna take it out. So your
money keeps growing on
non subtracted taxes and non subtracted fees in
your retirement account. So you will pay
Zikau on your actual retirement account market value.
Unless you're buying a home, can you please
take it out? Unless you're buying a home
this year within the next few months and
you're taking it out, that may be a
different scenario.
Yeah.
Yeah.
Can you please repeat the, like, mechanism of
how do you pay early zigzag? Like, how
do you Can you pay early zigzag? I
have an article on my website, ask the
scholars.com,
but super short answer is,
let's say
you pay $200
a cap 3 months early.
And now what you do is you look
at how much money you have in in
your account. So let's say you have $9,800
in your account. Because you paid the $200,
it did it got subtracted. You add $200
back to the $9,800,
and now you have $10,000.
Now you do 2.5 percent of that. Figure
out what the zakah is, and the 200
that you pay, subtract that, and the rest
that you have to pay, you have to
pay that much zakah left.
Got it? Anything else? Alright. We'll leave it
at that. Great questions. And may Allah
help us to be among the people who
pay our zakkah correctly and properly
and teach this information and this knowledge to
other people who need it.