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Ruling 1803

If a person does not make a profit at the end of a year and borrows money in order to meet his living expenses, he cannot deduct the borrowed amount from the profit made by him in future years and thereby not pay khums on the profit. However, if he borrows money to pay for [something that is a necessary or reasonable expense], such as a car or a house for his personal use, then while he owes money for the purchase of that item and is using it, he can deduct the borrowed amount from his income in future years provided he has not already deducted that borrowed amount from his income in previous years. If he borrows money during the year to meet his living expenses and makes a profit before the year’s end, he can deduct the borrowed amount from his profit. Furthermore, in the first case, he can repay the borrowed amount from the income he receives in future years and that amount will not be liable for khums.8

8. This ruling marks a change from al-Sayyid al-Sistani’s previous opinion on loans. His Eminence now allows the remaining outstanding balance of a loan to be deducted from the surplus income of future years until the time the person’s cumulative surplus income reaches the amount of the outstanding loan balance. After that point, only payments of the interest part of the loan will be considered deductible expenses for the purposes of calculating one’s khums liability; repayments of the capital loan amount will not be deductible. For further information, see Khums: A Brief Guide, pp. 7-11; and Minhāj al-Ṣāliḥīn, vol. 1, pp. 444-445, Ruling 1231.