Home Ownership, Real Estate Investment, and Zakat

Answered by Ustadh Tabraze Azam

Question: I own two houses, House A and House B. I have about $200,000 in equity in House A (principal place of residence) and about $20,000 in House B (investment property). These appear to be long term debt. 1) Do I pay Zakat on the equity I have calculated in my house? 2) Am I entitled to deduct the last 12 monthly instalments or just the most recent monthly instalments on these home loans?

 

Answer: Assalamu alaikum wa rahmatullahi wa barakatuh,

I pray that you are well, insha’Allah.

[1] There is no zakat on property acquired for personal ownership. Thus, one does not include the value of one’s house in one’s calculations. One would, however, include any money obtained from selling or renting out such property. On the other hand, property acquired with the specific, firm intention to trade is subject to zakat, and hence would be included in one’s calculations.

[2] It would be permitted to deduct up to 12 month’s worth of payments for the purposes of one’s zakat calculations.

[Ibn `Abidin, Radd al-Muhtar; Kasani, Badai` al-Sanai`]

And Allah alone gives success.

Wassalam,

Tabraze Azam

Checked & Approved by Faraz Rabbani