Do I pay zakat on rental property?

The property's value is exempt

The Prophet Muhammad ﷺ said there is no zakat on a Muslim's horse (Sahih al-Bukhari 1464), and scholars applied the same idea to assets that you keep and use rather than trade. A rental property is kept to earn income, like a taxi a driver owns or a machine in a factory. So the four schools don't require zakat on the building's market value.

Rental income

Rent you receive becomes part of your cash. On your zakat date:

• Add the rent you still have (after expenses you've already paid) to your other savings.
• Subtract debts due now, like this month's mortgage installment or a repair bill.
• Pay 2.5% on the total if it's above the nisab.

Rent you spent during the year isn't counted. See How do I calculate my zakat?

Property bought for resale

If you buy property to renovate and sell, or to flip when prices rise, it's trade goods. Zakat is due each year on its current market value, as with stock in a shop. If your intention changes, for example you decide to sell a rental you'd planned to keep, many scholars say it becomes trade goods from that point. See Do I pay zakat on my business?

Another view

Some contemporary scholars suggest paying zakat on net rental income when it's received, by analogy with crops, instead of waiting for a year. Most scholars and fatwa councils stick with the classical approach above, but if you follow this view, apply it consistently. If the property is financed with an interest-based mortgage, see Can I have a mortgage as a Muslim?