You’ve finally got that rental property in Kitengela or that apartment in Kilimani bringing in cash every month. Life is good. But then you hear stories—a landlord in Westlands got a huge KRA bill, another in Thika is facing penalties. Suddenly, that steady income feels shaky. How do you enjoy your rental earnings without the Kenya Revenue Authority (KRA) becoming your unwanted tenant?
This isn’t about complex accounting. It’s a straight-talk guide on how to stay KRA-compliant as a landlord earning rental income in Kenya. We’ll break down what to declare, how to pay, and the smart moves to make today. Let’s get your paperwork as solid as your foundation.
What Exactly is Rental Income? KRA’s Definition
First things first, what are you actually taxed on? It’s not just the monthly rent. KRA casts a wide net. Any payment you receive for the use or occupation of property is taxable rental income.
This means your baseline rent is just the start. If you charge extra for parking space, that’s income. A separate fee for the watchman or garbage collection? That’s income too. Even if a tenant pays for major repairs and you deduct it from the rent, KRA still sees the full rent as your income.
Common Income Sources Landlords Forget
- Monthly Rent: The obvious one.
- Service Charges: Parking, security, water bills if not reimbursed.
- Non-Refundable Deposits: Any deposit you don’t intend to give back.
- Payment in Kind: If a tenant, say, fixes your car instead of paying rent, the market value of that repair is income.
Step-by-Step: Registering and Declaring with KRA
You can’t be compliant if you’re not in the system. If you’re new to this, you need a KRA PIN. For rental income, you specifically need to activate the “Rental Income” line in your iTax profile.
Log into iTax, go to the registration section, and add “Rental Income” as a source. It’s a straightforward process, but have your property details and expected income estimates ready. Once active, you’re set to file.
Filing Your Return: The Annual Ritual
Rental income tax is filed annually. The deadline is June 30th for the previous year’s income (January to December). Don’t wait for the last week of June when the iTax portal is crawling slower than a matatu in Nairobi rush hour traffic.
You’ll need to fill the Form A: Rental Income Schedule. Here, you list all your properties, their locations (e.g., Lavington, Syokimau), and the total annual rent earned from each. The system then calculates your tax.
Allowable Expenses: What You Can Deduct
Here’s the good part! KRA doesn’t tax your gross rent. You can subtract legitimate expenses you incurred to earn that income. This lowers your taxable profit. But you must have receipts—no receipts, no deduction.
Think of expenses that are directly for the rented property. The cost of repairing a broken water heater is deductible. The interest on a mortgage you took to buy the rental house? Also deductible. But be sharp, personal expenses don’t count.
List of Common Allowable Deductions
- Repair and Maintenance Costs: Fixing leaks, repainting, plumbing.
- Insurance Premiums: Fire or burglary insurance for the building.
- Management Fees: If you pay an agent or company like Knight Frank or a local caretaker 10% to manage the property.
- Land Rates and Service Charges: Paid to the county government.
- Loan Interest: Interest on a loan used to purchase or improve the rental property.
Calculating and Paying Your Rental Income Tax
So how much do you actually pay? Rental income is added to your other income (like your salary) and taxed at individual graduated rates. But there’s a simplified option: 10% Withholding Tax on the gross rent.
Most individual landlords use the 10% rule. It’s simpler. If your monthly rent is Ksh 50,000, your annual gross is Ksh 600,000. Your annual tax would be 10% of that: Ksh 60,000. You can pay this in installments via iTax.
The 10% Withholding Tax Option
This is a final tax. You choose it by declaring your gross rent and not claiming any expenses. It’s perfect if your expenses are low or you lack receipts. Just calculate 10% of your total annual rent, file, and pay. Done. No further questions from KRA on that income.
Kenya-Specific: Navigating Local Realities & Pitfalls
Theory is one thing. The Kenyan property scene is another. Let’s talk real talk. You have a tenant in Utawala who pays via M-Pesa every 5th of the month. That digital trail? KRA can see it if they look. Burying your head in the sand is a direct ticket to a compliance notice.
And what about the long rains? That’s when you get frantic calls about leaking roofs. The repair bill from that trusted fundi is a deductible expense—but only if he gives you a handwritten receipt with his KRA PIN. No receipt, you lose that deduction and pay more tax.
The Agent & Cash Dilemma
Many landlords in areas like South B or Ngong use local agents. If the agent collects cash and hands it to you, ensure they give you a statement. Better yet, have tenants pay directly to your bank or M-Pesa. It creates a clear record. Remember, even cash income is taxable. That “kitu kidogo” under the table thinking is a major risk.
Also, know your county government. Pay your land rates to Nairobi City County or Mombasa County on time. That receipt is your proof for a deductible expense. Ignoring those rates can lead to a property auction notice, which is a bigger headache than any tax form.
Common Mistakes That Invite KRA Audits
KRA isn’t chasing everyone. They use data matching. Avoid these red flags that make you a target.
First, declaring suspiciously low income. If properties in your area (say, Ruaka) are going for Ksh 80k, and you declare Ksh 20k, questions will arise. Second, ignoring iTax messages. KRA sends emails and SMS. Marking them as spam won’t make them disappear.
- Mixing Personal & Property Finances: Using the same M-Pesa or bank account for rent and your supermarket shopping. Open a separate account for the property.
- Forgetting to Update iTax: Bought a new rental unit in Athi River? You must add it to your rental schedule immediately.
- Assuming “No Tenant, No Tax”: If your property is vacant but available for rent, you still need to file a nil return. Silence is not compliance.
Your Compliance Action Plan: Do This Today
Don’t get overwhelmed. Start with one step. Log into your iTax account now. Check if “Rental Income” is active. If not, activate it. Gather all your rent records for the past year—M-Pesa statements, bank slips, agent records.
Next, find all receipts for repairs, insurance, and land rates. Put them in one folder (a physical one or on your phone). Now, you have everything you need to either calculate your 10% tax or your profit after expenses. File before the June rush.
Set a yearly reminder on your phone for May 1st: “FILE RENTAL TAX.” Use the dry season, when things are calm, to sort your taxes instead of waiting for the rainy season chaos.
Staying Ahead: It’s Easier Than You Think
Staying KRA-compliant as a landlord in Kenya isn’t about being a tax genius. It’s about being organised and honest. It protects your investment from sudden, painful penalties and lets you sleep peacefully. Treat it as a non-negotiable operating cost of your rental business.
The key takeaway? Get on iTax, understand your income and deductions, file by June 30th, and keep every single receipt. Your future self will thank you when you can confidently reinvest your clean, compliant rental income into your next property. Got questions or your own tip for fellow landlords? Drop a comment below and let’s share the knowledge.