Regarding Zakāh calculation in the presence of any kind of loans, a distinction is made between immediate and deferred loans. Any amount is immediately due at the time of paying the Zakāh or during the year since last Zakāh payment is deducted from the Zakatable wealth, and the remaining amount is subject to Zakāh if it reaches the Niṣāb (minimum Zakatable threshold).

For long-term (deferred) loans, such as mortgages, only the amount owed during the Zakāh payment period and at the time of Zakāh distribution is considered. This amount is deducted from the total value, and the remaining value is used for Zakāh calculation. Having a long-term debt does not prevent the obligation of paying Zakāh for the year unless the debt payment is made within that same year.

Concerning Zakāh on real estate, a distinction is made between properties used for personal residence and those used for earning income, such as rented properties.

For the first type, properties used for personal residence (e.g., homes), there is no Zakāh on such properties because they are occupied for personal use. This is based on the Ḥadīth where the Prophet (peace be upon him) said: “There is no Zakāh on a Muslim’s servant or horse” [Agreed upon].

Ibn ῾Abd al-Barr in (At-Tamhīd) said: “Most of the scholars said: The meaning of this Ḥadīth applies to items acquired for personal use and not intended for trade.”

For the second type, properties used for earning income (e.g., rented properties), scholars have different opinions regarding Zakāh on such properties, and three main views can be summarized:

First View: Zakāḥ is not obligatory on the property’s value but on the rental income. The rental income is added to the total saved wealth, and one pays a quarter of the tenth (2.5%) if the total wealth reaches the Niṣāb.

Second View: Zakāh is obligatory on both the property’s value and the rental income. This is based on the reasoning that the property, having transitioned from personal use to income generation, should be subject to Zakāh similar to the Zakāh on rented gold. This is the view of Ibn ῾Aqīl from the Ḥanbaliys. In this view, the Zakāh payer gives a quarter of the tenth from the property’s value and the rental income.

Third View: Zakāh is obligatory only on the rental income not the value, with a percentage equivalent to the Zakāh on crops (one-tenth). This view considers administrative and maintenance expenses before calculating Zakāh. Scholars like Shaykh Abī Zahrah and Dr. Al-Qaraḍāwiy support this view. This is also the view that we prefer for this question.

It is worth noting that if a property is mortgaged, and the debts consume the entire rental income, then there is no Zakāh on the rental income, as it has been used to cover the debt on the property.

Fatwa issued by Dr. Khālid Naṣr