Calculation of Zakat on Financial Assets for American Muslims: A Financial and Jurisprudential Approach

Abstract

This thesis presents a comprehensive framework for calculating Zakat on modern financial assets specifically tailored for American Muslims. As one of the five pillars of Islam, Zakat is an obligatory form of charity for those who meet specific wealth criteria. However, applying traditional Zakat principles to contemporary financial instruments poses significant challenges, particularly within the context of the U.S. financial system.

The research addresses these complexities by developing methodologies that consider diverse financial instruments, valuation challenges, tax implications, accessibility issues, and Shariah compliance. The framework covers a wide range of assets, including cash and bank accounts, stocks, mutual funds, bonds, cryptocurrencies, retirement accounts (401(k)s, Traditional and Roth IRAs), Health Savings Accounts (HSAs), employee stock options, precious metals and jewelry, and real estate investments.

Bridging classical Islamic jurisprudence with modern financial realities, this thesis provides detailed calculation methodologies for each asset class, incorporating U.S.-specific considerations such as tax-deferred accounts and capital gains implications. The framework is designed to be adaptable to evolving financial markets and balances various scholarly opinions on contentious issues. To enhance accessibility, both comprehensive and simplified calculation methods are offered, catering to users with different levels of financial literacy.

In conclusion, this thesis makes a significant contribution to Islamic finance by offering a structured, principle-based approach to Zakat calculation that is both Shariah-compliant and applicable in the modern American financial context. It provides a valuable resource for American Muslims striving to fulfill their religious obligations amidst the complexities of the U.S. financial system and lays the groundwork for future research in Islamic finance in Western contexts.