How Debts Affect Your Zakat

Debts reduce your zakatable wealth. The basic principle is that Zakat is calculated on your net wealth, not gross wealth. This means you can deduct certain debts from your total assets before calculating Zakat. However, not all debts can be deducted—only those that are due immediately or very soon. For example, if you have £10,000 in savings but owe £3,000 on a credit card that is due next month, many scholars allow you to deduct the £3,000. Your zakatable wealth becomes £7,000, and your Zakat is £7,000 × 0.025 = £175.

Only immediate debts can be deducted. Short-term debts are obligations you must pay within the next year. These include: credit card balances, personal loans due soon, rent or bills owed, and money borrowed from family or friends that you must repay quickly. These can be deducted. Long-term debts, like mortgages or student loans, cannot usually be deducted in full. The reasoning is that these debts are spread over many years, and you are not required to pay them all at once. Only the portion due in the next 12 months can be deducted, according to many scholars. For example, if you have a £100,000 mortgage but only £5,000 in payments are due this year, you can only deduct the £5,000, not the full £100,000. Why This Matters

Some people mistakenly deduct their entire mortgage from their wealth. This can result in paying little or no Zakat when, in reality, they have significant savings and assets. This is a serious mistake because it means Zakat is not fulfilled. The safe approach is to only deduct debts that are genuinely immediate. If you are unsure, consult a scholar or err on the side of caution and deduct less rather than more. warning Do Not Over-Deduct Deducting long-term debts like mortgages can lead to underpaying Zakat. Only deduct what is due in the near term.