# How to calculate zakat while in debt

I recently bought a house and got Shariah loan (Mortgage). The only difference is that in the Shariah loan they don't use the word "interest". They say I am paying them "rent" at a fixed percentage which is same as today's interest rate.

Now how do I calculate Zakat on my wealth if I am still in debt? Because if I do so, my net-worth will be negative.

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Great question - please note however that we have not yet attracted experts in fiqh of transactions to this website. In any case, answers on this website should not be taken as juristic rulings. You may however get links to such rulings in the answers. – Ansari Jul 25 '12 at 17:22
so let me get this right, you are gonna pay a fixed amount of money each month, and by the end of a year, what you have paid is more than your wealth? – akram Jul 25 '12 at 19:06
well, if i calculate the net, it does. in the books i own the house but technically i don't as i am paying "rent" to live in. – Asdfg Jul 25 '12 at 19:08

Zakat is meant to help those in poverty, by distributing the wealth from those who have much more than they need, which is why most forms of Zakat are applied on those who have maintained more than a certain amount of money in their bank accounts.

There's a Nisab on Zakat which means that you have a minimum amount before you are obligated to pay Zakat. If your net worth would be negative, or below the Nisab amount, you're not obligated to pay (Zakatguide.org).

c) In long term, instalment debts, like housing instalments, and other debts that finance fixed assets, which are not counted for Zakat, the payer deducts the amount of annual instalment all at a time, then calculates the total sum of the remaining property and pays Zakat on it if it reaches the Nisab of Zakat.

For example, someone might have US\$100,000 in their bank account (which is above the Nisab level) and holds a \$200,000 loan. They pay \$15,000 of that loan a year.

The debtor would have to pay Zakat on their \$85,000 (savings minus installments) in their bank account, despite having a negative net worth. Which would mean that they pay \$2,125 of Zakat (2.5% of \$85,000).

On the other hand, let's they were to pay \$98,000 off their loan off that year, leaving them with a loan of \$102,000. This puts their savings at \$2,000 (below the Nisab level). They wouldn't have to pay Zakat on this, despite having the same net worth.

This is to the best of my understanding; if someone can confirm or correct this, it would be helpful.

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Actually, I'm not sure if this is true. You can have a debt (say, \$250k mortgage) but you still have savings in your bank account. Unless you mean that you should subtract your savings from your debt? – ashes999 Jul 27 '12 at 3:25
Sorry, that could be worded better. I mean you subtract what you're paying for loans from your savings. If your savings after paying for those loans are below the Nisab level, you do not need to pay Zakat. I'm uncertain if it's possible to "evade" Zakat by paying a little extra in order to stay below Nisab level, but it would make sense because you're not hoarding the money by using it to pay off debts. – Muz Jul 27 '12 at 6:39
Okay, please update your answer to qualify. Based on this, someone who gets a mortgage would probably never pay zakah then? – ashes999 Jul 27 '12 at 8:57