Fatwa ID: 07099

 

Answered by: Maulana Mamunur Hussain 

 

Question:

 

In the US, we have a thing called “Donor Advised Funds” (DAF). It allows you to contribute money upfront to the DAF and claim a charitable tax-deduction for that year. The money that you contribute can be disbursed in the future, but it can’t be withdrawn. It can only go to charities.

 

The two major benefits of the DAF is:

 

– if you make all your charitable contributions through the DAF (let’s say to 20 different organisations in a calendar year), you only need one line item on your taxes for the DAF contribution and not the 20 organisations that you contributed to (so less paperwork/hassle and more privacy)

 

– if you’re going to have an outlier high-income year, it’s better to get the tax deduction in that year with a large upfront contribution (to minimize the amount of taxes paid at the marginal bracket) than to spread that same deduction over high income and regular income years

 

Actual question:

 

Is zakat owed on money that is stored in the DAF that has not yet been disbursed? Like I said, it cannot be withdrawn and can only be disbursed to charities (non-profits, masaajid, zakat, etc.)

 

Regardless of whether or not zakat is owed on this, the DAF is still worth exploiting. Just curious what the zakat treatment would be (I’m assuming it’s still 100% zakatable).

 

 

In the name of Allah, the Most Gracious, the Most Merciful

 

Answer:

 

Zakah is one of the obligations due upon every Muslim who is an adult, sane and free¹, the must also be in possession of wealth which meets the minimum nisab level and be in possession of that wealth for a year.

 

One should deduct their necessities, such as rent and living costs, there is no zakah upon property that a person lives in and furniture therein, as well as clothes² and any other necessity that they need day to day from their wealth.

 

As you have given the money away as charity, you do not need to calculate that wealth as part of your wealth, as it will be given away at some time and you have no way of getting that money back. As such, there will be no zakat upon that, as it will not be considered as your wealth.

 

 

Only Allah (عز و جل) knows best.

Written by Maulana Mamunur Hussain

Checked and approved by Mufti Mohammed Tosir Miah

Darul Ifta Birmingham

 

 

 

 

1 Mukhtasar al-Qudoori (DKI, pg 51)

الزكاة: واجبة على الحر المسلم البالغ العاقل إذا ملك نصابا ملكا تاما وحال عليه الحول وليس على صبي ولا مجنون وال مكاتب زكاة

 

 

2 Mukhtasar al-Qudoori (DKI, pg 51)

ومن كان عليه دين يحيط فلا زكاة عليه

وإن كان ماله أكثر من الدين زكى الفاضل إذا بلغ نصابا وليس في دور السكنى وثياب البدن وأثاث المنازل ودواب الركوب وعبيد الخدمة وسلاح الاستعمال زكاة