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If I pay interest for the house but it comes out of my taxes, is it ok? (if I pay interest, I dont pay taxes, vice versa)

Answered according to Hanafi Fiqh by Askimam.org

(1)This is the explanation of one of the Brothers for paying interest on his house. The banks in USA are all private mostly which are supported by the government (the gov. gives them the security to give loans to the people. ie gov. stands as guarantor for the people who apply for the loans ) but the gov does not give the loan by itself directly. The taxes which we save at the end of the year, they are payable to the gov. not to the banks. Please explain in this situation what is your fatwa. (2) The details of this is for example I get 100,000 dollars of loan i will have to pay 7200 dollars of interest in 1 year and it will offset only 2200 dollars of federal income tax so it is not a situation where you would offset a fixed amount of tax with the same amount of interest.On the loan when you pay the principal that is not tax deductible.In this situation is it permissible to get a loan(Mortgage) from federal gov and save the federal gov tax as explaind above. Please explain the situation in detail if there is any way we can get loan(Mortgage) to buy a house here in USA.

Answer

(1) Since the government is an active partner (guarantor) to the bank in loans,
therefore, it will be permissible to offset the interest due to the bank
with tax deduction.

(2)If you were to pay $2200 dollars as federal tax, then you may offset the
interest of $2200 only to the federal government. Therefore, it is incorrect
to take a loan whereby you will pay an extra $5000 dollars on interest.

and Allah Ta’ala Knows Best

Mufti Ebrahim Desai
FATWA DEPT.

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