Zakat on IRAs, Roth IRAs, 529 Plans and HSAs: How Scholars Calculate It

Most scholarly bodies that have addressed U.S. retirement accounts say zakat is due each year on the amount you could actually withdraw, after early-withdrawal penalties and taxes. Another view holds that no zakat is due until the money becomes accessible without penalty. For a Roth IRA, contributions can be withdrawn without penalty, so they are generally treated as zakatable wealth.

Reviewed by Hafiz Maqsood Ahmed.

The question affects a growing share of American Muslim savings. In 2026 Americans can contribute up to $7,500 to an IRA, plus a $1,100 catch-up for those 50 and older, according to the Internal Revenue Service. The rules below are the positions of named bodies, and they differ; The Halal Times does not issue rulings. Our guide to zakat explains the nisab and the basic conditions.

The two main views

AMJA’s formula, from a 2008 fatwa by Dr. Main Khalid Al-Qudah, is: “withdrawable amount – prescribed penalty – prescribed tax = zakatable amount.” A later AMJA fatwa added that zakat is due annually and that “it is enough for the money to be withdrawable (even with penalty).” If a person cannot pay that year, AMJA says the zakat becomes a debt, to be recorded in a will.

Traditional IRAs

A traditional IRA works like a 401(k) for this purpose. Withdrawals before age 59½ generally face a 10 percent federal penalty plus income tax. Under AMJA’s formula, an account holder subtracts both from the balance and pays 2.5 percent on the remainder, provided total zakatable wealth exceeds the nisab. The same calculation is set out step by step in our 401(k) zakat guide.

Example: A $100,000 traditional IRA, a 10 percent penalty ($10,000) and an assumed 22 percent income tax rate ($22,000) leave $68,000. Zakat at 2.5 percent is $1,700.

Roth IRAs

Roth IRAs differ because contributions, unlike earnings, can be withdrawn at any time without tax or penalty. The Zakat Foundation of America’s guidance says zakat is due on contributions before age 59½ and five years of holding, and on the full value after that. Under AMJA’s formula, the same result follows: the contributions are fully withdrawable, and earnings would be counted after any penalty and tax.

529 college savings plans

No named scholarly body we found has issued a specific ruling on 529 plans. Applying AMJA’s general formula, the account owner, usually a parent, would count what could be withdrawn: contributions come back without tax, while earnings withdrawn for non-education uses face income tax and a 10 percent federal penalty. Those who follow the restricted-access view could argue the money is set aside for a child’s education, but the parent still owns and controls the account. Families with large 529 balances may want to ask a qualified scholar.

Health savings accounts

An HSA belongs to the account holder and can be withdrawn at any time; money not spent on qualified medical expenses is taxed and, before age 65, penalized. Applying AMJA’s formula, the HSA balance minus the tax and penalty that would apply to a non-medical withdrawal is zakatable. No named body we found has issued a dedicated HSA ruling.

Investments inside these accounts

Many retirement accounts hold shares or funds. Some scholars value long-term shareholdings at the company’s zakatable assets rather than market value, which lowers the amount; Britain’s National Zakat Foundation uses a proxy of 25 percent of market value for long-term shares. Employer stock held outside a retirement plan is covered in our guide to zakat on RSUs, stock options and ESPP shares.

Practical steps

1. Choose a zakat date and use the account balances on that date.
2. For each account, work out what you could withdraw today, after penalties and taxes.
3. Add the results to cash, gold and other zakatable wealth.
4. If the total exceeds the nisab, pay 2.5 percent.
5. If you follow the restricted-access view, record the approach you used so you apply it consistently each year.