When one gives zakat to a tax-eligible charitable foundation and subsequently receives a tax benefit in the form of a refund, such a refund represents the taxpayer’s own money being returned and, from a sharʿī perspective, is treated as a debt owed to the taxpayer. Zakat on such funds becomes due only once the refund is actually received and added to one’s other assets.^[1] Accordingly, if the refund is received after one’s zakat date, it is treated like any other income acquired thereafter. It is not regarded as any portion of the individual’s zakat “returning” to them, nor does it undo the zakat they previously discharged. Rather, it simply becomes part of one’s wealth going forward, similar to a paycheck received after the zakat date, and there is no requirement to pay zakat on it for the prior year.^[2]

The ruling is the same whether the individual is a W-2 employee or is self-employed, working on a 1099, or operating a business. In all of these cases, taxes are typically paid throughout the year, either through withholding or estimated payments, and any excess amount paid is later returned in the form of a tax refund.^[3]

Employer-matched donations do not count as zakat or ṣadaqa on behalf of the employee. This is because the employer’s contribution never enters the employee’s ownership or possession, nor is it transferred by the employee. It is given directly from the employer to the charitable organization, and is therefore considered the employer’s donation, not the employee’s.

Finally, while there is no issue in benefiting from the tax reduction associated with donating to a tax-eligible charity, one’s intention for donating to such organizations should not be merely for the purpose of obtaining a tax benefit. Zakat is an act of ʿibāda (worship) and through which one hopes to acquire Allah’s ﷻ pleasure, and this consideration should remain the primary motive when giving.

And Allah knows best.

Mawlana Muhammad Bilal Khizar
Student, Darul Iftaa Chicago

Reviewed and approved

Mufti Abrar Mirza
Head Mufti, Darul Iftaa Chicago