Wa `alaykum as-Salamu wa Rahmatullahi wa Barakatuh.
In the Name of Allah, Most Gracious, Most Merciful.
All praise and thanks are due to Allah, and peace and blessings be upon His Messenger.
In this fatwa:
What you are doing in calculating the due Zakah is correct. Probably, you do not have other investments in addition to mutual funds and IRA. If you do, you should add any investments in real estates, shares and the like and any debts you own on others like friends and family members if you believe that these debts are going to be paid back to you.
Responding to your question, Prof. Dr. Monzer Kahf, Professor of Islamic Finance and Economics at Qatar Faculty of Islamic Studies, states:
What you are doing in calculating the due Zakah is correct. Probably, you do not have other investments in addition to mutual funds and IRA; if you do, you should add any investments in real estates, shares and the like and any debts you own on others like friends and family members if you believe that these debts are going to be paid back to you.
Not deducting any expenses is correct as your expenses are already gone from bank accounts and the like.
Apparently, you are still working and earning income; professional income or salary so that your expenses for the short period after the beginning of the year will come out of these new earnings.
This is correct too; you need not make any deduction from the total on which you take 2.5%.
My reason is the following: since you run it, it is still under your control. This is equivalent to being not paid until the charity actually is distributed to the poor during the year.
Zakah, when it is due, must go out of your control into the ownership of the poor and needy. On the other hand, it is permissible to pay Zakah during the year and make the calculation at the end, and then you only pay the balance.
In this case, you are not delaying its payment as the balance will be small and can be disposed of shortly.
Finally, I’d like to advise you that whenever you pay other charity to persons who deserve Zakah, make the intention that this is for past years’ Zakah that you said you did not pay.
Zakah is due on every Muslim and does not die out by the passage of time. You really are still required to estimate the due Zakah for all these past years and pay it; it is the definite and determined right of the poor as the Qur’an describes it.
Allah Almighty knows best.
Editor’s note: This fatwa is from Ask the Scholar’s archive and was originally published at an earlier date.