Question:

Asalam Alaikum Dear Mufti
I have been reading your answers regarding zakat calculations and wasn’t able find Information I was looking for, kindly assist with my questions as follows:
1. I have a buisness whome I have 50% share , will the zakat be on 50 percent of my share? What about buisness liabilities such as loan payments, payroll, inventory on hand and miscellaneous expenses. What should be deducted.
2. In the same buisness which I share with a non Muslim, We have rental properties that generate income and 3 residential plots. Shall I include those as an Assets and calculate my share for zakat?
3. I am also employed and have 401K and IRA account that have increased in value from last year. Previously I never calculated this retirement account for zakat calculations as I wasn’t sure, However because of the significant increase in value I would like to calculate the zakat as accurately as possible.
Please advice and Jazakallah Khair for all your efforts in helping us . I am planning to calculate and fund zakat on 15th of Ramazan.

Answer:

In the Name of Allah, the Most Gracious, the Most Merciful.

As-salāmu ‘alaykum wa-rahmatullāhi wa-barakātuh.

1. In principle, a business is comprised of two types of assets, fixed assets and current assets. There is no Zakah due on the value of the fixed assets such as the machinery, building, furniture etc. Zakah is only due on current assets such as cash, business merchandise, receivable loans, and gold.

In terms of liabilities, only the loan payments due within the next 12 months will be deducted. With regards to payroll and expenses, only outstanding (not future) expenses such as utility bills and outstanding (not future) salaries may be deducted.

After adding all current assets and deducting liabilities, you will pay Zakah only on 50% of the total amount. For example, if your total current assets equal $50, 000 after subtracting liabilities, then you will give 2.5% of $25,000 as Zakah since you only own 50% of the business.

2. Zakah is only due on properties if they are purchased with the intention to sell. If they are purchased with the intention to lease out, then Zakah is not due on the value of the property. Whatever amount from the rent is remaining in your ownership on your Zakah day will be liable for Zakah.
3. Zakah is due on the total amount of the 401K account if the money is vested. If it is not vested, then only your contribution is liable for Zakah.

For more information, kindly listen to the following talk on Zakah:

masjidyaseen.org/wp-content/uploads/2020/04/Fiqh-of-Zakah-and-Taraweeh.mp3

And Allah Ta’āla Knows Best

(Mufti) Abdul Azeem bin Abdur Rahman