Re: Is there zakat on 401K?
Woah!
Well done Robert … Your post has made me rethink everything. I’m now going to make a complete 180 degree turn and agree with Captain1. I see now that we should view it like this not that “we don’t have access to it therefore it is not zakatable, but instead if we did get access to it how much in real terms would we get”
So let’s say we have $100k in the 401k account and we want to assess the real value on it. It will be as though we are talking the whole amount out. We would incur a penalty first, then the amount would be income (capital gains) taxed. I’m not sure about the taxation in US but lets assume the tax comes to around 30%. Likewise lets say the penalty comes to around 30% too. Then we get this formula:
$100k x 0.7 x 0.7 = zakatable amount = $49k hence the total zakat value assuming no debts comes to = $1225
So in reality we leave the money in the account but to calculate the zakat we need to pretend as though we are making a full withdrawal … the argument of “not having access” to it is not applicable because Qiyas done over how loans are handled in Islam, but this is a much better way to deal the 401k account. Thanks Robert and Captain1 yes I agree with you now. 