Zakah with Debt and Extra earned money

In The Name of Allah, Most Merciful and Compassionate

You must pay zakat on the money you borrowed, if all the conditions of zakat on money exist, because debt does not prevent the obligation of zakat.

Shaykh Ibn Hajar al-Haytami, Allah have mercy on him, said in Tuhfah: "Debt owed by someone in whose hand is a zakat-payable amount (nisab) or more does not prevent it [zakat] from being obligatory for them according to the strongest of positions, whether the debt is due or deferred, whether it is owed to Allah or a human being. This is due to the general nature of the primary texts which obligate it [zakat] and because the person owns a zakat-payable amount and is able to execute transactions with it."[1]

The conditions which make zakat on money obligatory are two: (1) that you had a zakat-payable amount (the dollar equivalent of 592.9 grams of silver at that time) or more, (2) that at least this amount remained in your ownership for an entire lunar year.

So if you spent so much of the money that less than this amount remained any time during that year, you do not owe zakat on this money. However, if you invested this money, on merchandise for example, you might owe zakat on that merchandise and this zakat has its own conditions.

Then if the aforementioned two conditions are fulfilled, the zakat-year (hawl) for this money begun when you received it and ended one lunar year later. You must only pay zakat for the amount that remained with you during that entire lunar year. So if you received $5000 on Maharram 1, 1424 AH, for example, and on Maharram 1, 1425 AH you had $1000 left from the original sum, then you owe $25 zakat. And Allah knows best and He alone gives success (tawfiq).

[1] Ibn Hajar al-Haytami, Hawashi al-Sharwani Wa Ibn Qasim al-Abbadi 'Ala Tuhfah al-Muhtaj Bisharh al-Minhaj (Beruit, Dar Ihya' al-Turath al-'Arabi), 3:337.

Sunnipath.com - Shaykh Abdul-Karim Yahya, SunniPath Academy Teacher