Do I pay zakat on my savings and salary?

What is actually being taxed

The scholars distinguish between money you keep and money you spend. Zakat attaches to the wealth itself, not to the fact that it came as a salary.

Shaykh Ibn Baz set out the categories of wealth that carry zakat: gold and silver, the paper currency that now stands in their place, trade goods held for sale, crops and fruits, and grazing livestock. Everything outside these — the furnishings in your home, the car you drive, the house you live in — carries no zakat.

"Zakat is obligatory on gold, silver, and the currency people use today, and on trade goods held for sale..."— Shaykh Ibn Baz, Majmu' Fatawa wa Maqalat Ibn Baz 14

Savings from a salary are currency, so they fall squarely within the first category. The IslamWeb fatwas make this explicit: the money you accumulate from your salary is subject to zakat once the two conditions are met.

The two conditions

Both must be present together. If either is missing, no zakat is due.

• Reaching the nisab: the total of your savings must reach the value of 85 grams of gold, or 595 grams of silver, as the IslamWeb fatwas state. If your savings fall below this, there is no zakat on them.
• Completing the lunar year: the nisab must remain with you for a full Hijri year without dropping below the threshold. The year begins from the day your wealth first reached the nisab.

If both conditions are met, the amount due is one-fortieth — 2.5% — of the total.

If you spend your salary

A person whose salary is consumed by living expenses — maintenance, rent, and the like — and who saves nothing, or saves less than the nisab, owes no zakat. This is stated plainly in the IslamWeb fatwa on the salary of one who does not own a home: zakat is only due on the salary if its owner possesses a complete nisab that remains for a year without falling below it. Needing a home does not prevent zakat from being due on wealth that meets the conditions.

Your intention does not cancel it

Saving for a specific purpose — marriage, a house, paying off a debt — does not exempt the money. Shaykh Ibn Baz was asked directly about money set aside for a son's marriage and about savings intended for buying land or building a home, and he answered that zakat is due on it every year until it is spent, because as long as it remains in your possession it is your wealth.

"Zakat is obligatory on the amount mentioned if a year passes over it, even if it is set aside for marriage, or for paying a debt, or for building a house..."— Shaykh Ibn Baz, Majmu' Fatawa wa Maqalat Ibn Baz 14

The reasoning is that the general evidences making zakat obligatory on currency and its equivalent admit no exception for the purpose behind the saving.

Debts and what you may deduct

If you owe a debt — the fatwa mentions a debt owed to a parent — you may deduct what remains of that debt from the wealth you have accumulated, provided you have no other surplus wealth that could stand against it. If what remains after the deduction still reaches the nisab, you pay zakat on it; if it falls below, there is no zakat on it.

In practice

1. Fix a date. Choose the day your savings first reached the nisab and use it as your annual zakat date.
2. Check the total each year on that date. Add up all your cash and savings — bank accounts, currency held, and any trade goods.
3. Compare it to the nisab. If it reaches the value of 85 grams of gold or 595 grams of silver, zakat is due.
4. Pay 2.5%. Divide the total by forty; the result is what you owe, given to the poor and needy among those the Qur'an names in Surah al-Tawbah.

Key takeaways

• Zakat is due on savings from your salary once the total reaches the nisab and a full lunar year passes over it.
• The nisab is the value of 85 grams of gold or 595 grams of silver; the rate is 2.5%.
• Salary consumed entirely on living expenses, leaving nothing or less than the nisab, carries no zakat.
• Saving for marriage, a house, or a debt does not exempt the money — zakat is due each year until it is spent.
• You may deduct an outstanding debt from your savings before calculating, if nothing else stands against it.

Further reading

• Majmu' Fatawa wa Maqalat Ibn Baz
• Fatawa al-Lajnah al-Da'imah (on zakat of accumulated wealth)

And Allah knows best.