Calculation Methodology

For most asset types, we have to figure out how much is idle capital versus productive capital. Money is the easy one — it’s 100% idle by definition. It’s not funding a business, not tied up in equipment, not producing anything. It’s just sitting there.

This covers everything that behaves like cash: checking and savings accounts, high-yield savings, CDs, money market funds, and physical cash on hand. There’s complete scholarly consensus here¹ — no analysis needed, no adjustments, no ratios to compute. Whatever you have, that’s what’s zakatable.

When you own stock, you own a piece of a business — factories, employees, operations — and only the idle portion of that business is zakatable. Crypto doesn’t work that way. There’s no underlying company, no balance sheet to analyze, no productive assets to exclude. It’s pure value sitting in a wallet.

That makes the zakat treatment straightforward: 100% of your crypto’s market value counts, the same way cash does. This applies equally to Bitcoin, Ethereum, stablecoins, and tokens — regardless of whether you’re holding long-term or trading actively. If you can sell it today, it’s zakatable today.

A business has two kinds of assets: liquid ones (cash in the bank, money customers owe them, products ready to sell) and productive ones (factories, patents, office buildings). Only the liquid portion is subject to zakat — this is called the balance sheet method.³

How you hold stocks also matters. If you actively trade — buying and selling for short-term profit — those holdings are treated like trade goods and are zakatable at their full market value. Long-term investments use the balance sheet method, where only the company’s idle capital counts toward your zakat obligation.

For each stock you enter, we pull the company’s financial filings and compute the ratio of idle capital to total value. A tech company sitting on billions in cash will have a high zakatable ratio; a manufacturer with most of its value in equipment will have a low one. US companies use SEC EDGAR filings (10-K and 10-Q). International companies use filings from their home-country regulators across 40+ exchanges. Every holding in your results shows its data source and confidence level.

When you buy a fund, you’re buying a slice of every company inside it. A single S&P 500 ETF means you own a fraction of 500 different businesses — each with its own balance sheet, its own ratio of idle to productive capital. Your zakat should reflect that.³

We pull each fund’s portfolio from SEC NPORT filings — quarterly disclosures that list every holding and its weight. From there, we compute the weighted average idle capital ratio across all the underlying companies. An index fund tracking tech-heavy companies will have a different ratio than one tracking industrials.

For actively managed funds, we use the most recent NPORT filing. If no filing is available — for example, a small or newly launched fund — we count 100% of the fund value as a conservative default, the same principle applied throughout: better to slightly overpay than to underpay.

When you buy a bond, you’re lending money to an issuer — a corporation, a government, a municipality. Unlike stocks, there’s no productive asset behind your investment. Your principal is sitting with the borrower as idle capital, making it 100% zakatable at face value.

Bonds also raise a separate issue: interest. Interest income is impermissible revenue in Islamic finance,¹ so any returns you earn from bonds need to be purified — donated to charity, separate from your zakat. The calculator tracks this automatically and shows you the purification amount alongside your zakat obligation.

If you hold bonds inside a retirement account or mutual fund, the same rules apply — the bond allocation is fully zakatable, and any interest income from it requires purification. This is calculated at the fund level using the bond percentage from SEC NPORT filings.

Sukuk are the Islamic alternative to bonds — but instead of lending money and earning interest, you’re buying a share of a real asset like property, a project, or a service contract. That structural difference changes how zakat applies.

If your sukuk is asset-backed (Ijara, Musharaka), you own a fraction of a productive asset. The same balance sheet method used for stocks applies — only the idle capital portion of the underlying assets is zakatable, not the full face value.³

If your sukuk is structured more like a receivable (Murabaha), it’s closer to money owed to you. The face value is zakatable, similar to accounts receivable in a business.

When the specific structure can’t be determined, we count the full market value as a conservative default — better to slightly overpay zakat than to underpay.

A 401(k) or IRA might feel different from a brokerage account — you can’t withdraw freely, there are tax penalties, the money feels locked away. But zakat is about ownership, not access.⁴ If you own the assets, they’re part of your wealth.

The same analysis we apply to taxable accounts applies here. If your 401(k) holds a target-date fund containing 12 underlying funds, we trace all the way down to the individual companies — potentially thousands of them — and compute the combined idle capital ratio. Bond allocations within these funds are still 100% zakatable.

This covers 401(k), Roth 401(k), 403(b), 457(b), Traditional IRA, Roth IRA, SEP IRA, SIMPLE IRA, Solo 401(k), and TSP. The account type doesn’t change the analysis — what matters is what’s inside.

Owning stock means owning a fraction of a business — and that fractional ownership is what makes it zakatable. Equity compensation works the same way, but there’s a step before ownership: the grant has to convert into actual shares you hold.

With RSUs, that step is vesting. Before your shares vest, the RSU is a contractual promise — not property you hold — so it’s not zakatable. Once vested and transferred, those shares are yours and count toward your wealth.

With stock options (ISOs and NSOs), the step is exercising. Until you exercise, you don’t own shares — you own the right to buy them. Once you do, the zakatable amount is the spread between the current market price and your strike price. The strike price is capital you deployed to acquire the shares, not idle wealth, so it’s excluded.

With an ESPP, the step is the purchase. Payroll contributions sitting in the plan are still cash in transit — you don’t own shares until the plan buys them for you.

In the results, the full grant (all shares at market price) is shown as the market value, while only the owned portion counts toward your zakat obligation. Pre-IPO or restricted shares with no liquid market can be excluded until a liquidity event.

A gold bar in a safe, silver coins in a drawer, jewelry you never wear — these are wealth sitting idle. They’re not generating income or being used productively, so they’re 100% zakatable at current market value.

Jewelry you actually wear is where schools differ. The Hanafi position considers all gold and silver jewelry idle capital regardless of use — wearing it doesn’t change its nature as stored wealth. The Shafi’i, Maliki, and Hanbali schools take a different view: jewelry worn regularly for personal adornment is in active use, similar to clothing, and is exempt.⁴

Gold and silver are priced per gram using the LBMA PM Gold Fix and Silver Noon Fix — the same benchmarks used to set the nisab threshold and price metals throughout the calculator. Watches, art, and collectibles are entered at their estimated market value. If you’re unsure what something is worth, a conservative estimate is better than leaving it out. As of Feb 17: gold $156/g, silver $2.40/g.

Real estate follows the same idle-vs-productive rule as everything else — but what matters is your intent, not the property type.

Your home is productive personal-use property. You’re living in it, not storing wealth — so it’s exempt. The same logic applies to rental property: the building is actively generating income, making it productive capital. Any rental income you’ve received and are holding as cash is counted separately under Money.

Property you’re holding to sell is different. Once your intent shifts to selling, that property becomes idle capital waiting to be liquidated — similar to inventory in a business. It’s zakatable at its current market value.⁴

Vacant land depends on intent. If you’re holding it long-term with no plan to sell, it’s generally exempt. If you’re waiting for the right price, it’s zakatable.

If you own a business, the same idle-vs-productive distinction applies. Cash sitting in your business bank account, money customers owe you, and inventory waiting to be sold are all idle capital — they’re not doing productive work, they’re waiting to move. These are zakatable.¹

The equipment your business runs on — machinery, vehicles, office space, computers — is productive capital. It’s actively generating value, not sitting idle, so it’s exempt. The same goes for real estate your business operates from.

For inventory, use market value for finished goods ready to sell and cost basis for raw materials or work in progress. If you’re unsure about a particular asset, the test is simple: is it deployed in operations, or is it waiting to be converted to cash?

Zakat is calculated on your net wealth — what you own minus what you owe. If you have $50,000 in assets but owe $10,000 right now, your zakatable base is $40,000.

Debts you owe immediately — credit card balances, bills that are due, money you’ve borrowed from someone — are fully deductible. Essential bills coming due within 30 days (rent, utilities, insurance) also count.

Long-term debts like mortgages, car loans, and student loans are where scholars differ. The Hanafi, Maliki, and Hanbali schools allow you to deduct the next month’s installment payment — the portion that’s imminently due — but not the full remaining balance. The Shafi’i position is more restrictive, deducting only debts that are due right now. The calculator applies your chosen school’s position consistently.⁴

Zakat is personal — each person pays on what they own, not on the household’s collective wealth. When you add family members in the calculator, you can assign ownership to any asset. A joint brokerage account split 50/50, a savings account that belongs entirely to your spouse, a gold set your daughter received as a gift — each gets attributed to whoever actually owns it.

The calculator computes your zakat based on your share of every asset. Your portion is totaled, your debts are subtracted, and that determines what you owe. The nisab is checked against the household’s combined wealth rather than your share alone.

Assets without a specific owner default to you. If you don’t add any family members, everything is yours and the calculation works the same as it always has. If you need a separate calculation for someone outside your household — a sibling, adult child, or parent — they should go through the calculator independently with their own assets.

Zakat tells you how much to pay — but screening tells you whether you should be holding the investment at all. Not every company’s business activities are permissible, so we check each one.

Three things can make a stock questionable or non-compliant. First, too much debt: if a company’s total debt exceeds 30% of its trailing 36-month average market cap, it’s over-leveraged by Islamic finance standards (companies in the 30–33% range are flagged as borderline per AAOIFI guidance).³ Second, too much interest income: if more than 5% of revenue comes from interest or other impermissible sources, the company is earning substantially from prohibited activity. Third, impermissible business lines: revenue from alcohol, tobacco, gambling, conventional financial services, weapons, or pork must stay below 5%.

These thresholds come from AAOIFI standards and the Dow Jones Islamic Market methodology — the same benchmarks used by Islamic index funds worldwide. We pull the data from SEC EDGAR filings and show each holding’s status in your results: halal, questionable, or non-compliant.

While you hold the investment, purification applies to the impermissible percentage of your annual dividends. When you sell, scholars recommend purifying the same percentage of your capital gains. Both figures are shown per holding in your results.

The purification percentage for each stock is derived from the company’s financial disclosures — specifically, how much of its revenue comes from interest income and other impermissible sources. For bonds and conventional fixed-income instruments, all income — both interest and capital gains — requires purification.

Dividend yield data is sourced from Yahoo Finance (trailing 12-month). If no yield data is available (e.g., manual price entries), purification defaults to $0 while holding, but the on-sale percentage still applies.

Zakat is assessed at a point in time, so the prices we use need to be stable, verifiable, and the same for everyone. That’s why we use prior-day closing prices — not live quotes that change by the second.

For stocks and funds, that means the closing price from the most recent completed trading day before your calculation date. For gold and silver, we use the LBMA PM Gold Fix and Silver Noon Fix — institutional benchmarks set daily via formal auction, the same ones used by GLD/SLV ETFs, central banks, and Islamic finance indices like DJIM.

This gives you two guarantees. First, determinism: two people calculating on the same day will get the same prices for the same holdings. Second, auditability: the exact price date is recorded and shown in your results, so you can verify every number.