That moment you log into iTax and see your tax payable figure can be a real heart-sinker. You’re not alone. But what if you could legally shrink that number before you even hit ‘submit’? Good news: you can. This isn’t about dodging KRA; it’s about smartly using every shilling of relief and allowance the law gives you.
We’re breaking down the practical, legal ways to reduce your tax bill before filing returns in Kenya. From your NSSF to your NHIF and that insurance policy, let’s find your money.
Understanding Your Tax Reliefs: The Foundation
Before you dive into deductions, know your basics. Every employed Kenyan gets a Personal Relief of Ksh 2,400 per month (Ksh 28,800 per year). This amount is automatically deducted from your taxable income. Think of it as the government’s standard ‘hello’ gift.
But that’s just the starter. The real savings come from additional allowable deductions. These are expenses KRA says you can subtract from your gross income, meaning you’re taxed on a smaller amount. The goal? Maximize these to the legal limit.
1. Pump Up Your Pension Contribution
This is one of the biggest and best legal ways to reduce your tax bill. Contributions to a registered pension scheme (like your company’s scheme or a personal one) are deductible up to Ksh 20,000 per month or 30% of your pensionable income, whichever is lower.
If you’re only contributing the mandatory Ksh 200 to NSSF, you’re missing out. Top up your voluntary NSSF contribution or start a personal retirement scheme with providers like Enwealth or Zamara. The money grows tax-free, and you pay less tax now. Double win.
2. Don’t Ignore Your NSSF & NHIF
Yes, these are mandatory, but ensure they’re fully captured. Your NSSF contribution (Ksh 600 for Tier II if you earn above Ksh 6,000) and your NHIF amount are fully deductible. Sometimes payroll systems mess this up.
Before filing, cross-check your payslips against your iTax statement. Every shilling counts. If there’s a discrepancy, provide the correct totals to your employer or declare them yourself under the “Other Deductions” section when filing.
Lifestyle Deductions: Your Home, Health, and Loan
Your daily life costs can also trim your tax bill. KRA allows deductions for specific expenses that support social goals like home ownership and health.
3. Claim Your Home Ownership Deduction (Mortgage Relief)
Paying a mortgage for your first home? You can claim interest paid up to Ksh 300,000 per year. You’ll need a certificate from your bank (like HFC, KCB, or Co-op Bank) showing the interest amount paid in the year.
This is a massive saving, especially for Nairobi homeowners feeling the pinch of high mortgage rates. Don’t sleep on this. Get that certificate from your lender early, before the June 30th rush.
4. Get Sorted with an Approved Insurance Policy
Your life, education, or health insurance premium can be deductible. The policy must be from a company licensed by IRA (Insurance Regulatory Authority). The limit is Ksh 60,000 per year (Ksh 5,000 per month).
Check with your provider (e.g., Britam, Jubilee, APA) if your policy is ‘approved’ for tax relief. If you’re just using NHIF, consider a top-up medical cover. It protects you from huge hospital bills and cuts your tax.
5. The Owner-Occupier Interest Deduction
This is different from mortgage relief. If you took a loan to buy the house you live in, the interest is deductible up to Ksh 300,000 annually. It applies even if the house isn’t your first, as long as it’s your primary residence.
Again, a bank certificate is key. With the high cost of loans, this relief can significantly lower your chargeable income.
For the Hustlers: Business & Investment Deductions
If you have side income or run a business, your game changes. You can deduct all expenses “wholly and exclusively” incurred in generating that income.
6. Document Your Side Hustle Expenses
Do you do consultancy, content creation, or sell mitumba online? Track every expense: airtime for client calls, boda boda fare to deliver goods, M-Pesa charges, internet bundles, even a portion of your electricity if you work from home. Keep receipts (even simple ones).
These costs reduce your business profit, which is what gets taxed. A messy record means you’re paying tax on money you’ve already spent.
7. Capital Allowances on Assets
Bought a laptop for your freelance work? A camera for photography gigs? These are business assets. Instead of deducting the full cost at once, you claim a “capital allowance” (wear and tear) over several years as per KRA rates.
It’s a bit technical, but for a Ksh 80,000 laptop, you might deduct a chunk of its value each year, lowering your taxable profit legally.
The Kenyan-Specific Section: Navigating iTax & Beating the June Rush
Knowing the deductions is one thing. Successfully applying them on iTax before the June 30th deadline is a whole other Kenyan affair. Here’s the real talk.
First, do NOT wait until the last week of June. The iTax portal often gets slower than a matatu in Mombasa Road traffic during rush hour. System timeouts and frustration are guaranteed. Start gathering your documents in May.
You need digital copies (PDFs or clear photos) of your certificates: NHIF statement, NSSF statement, bank mortgage interest certificate, insurance premium certificates. Save them in a folder on your phone labelled “Tax 2024.” Pro tip: Name each file clearly (e.g., “Jubilee_Insurance_Cert_2023.pdf”) to avoid confusion when uploading.
When filing, you’ll input the deduction amounts under the “Deductions” tab. The system will calculate your revised tax payable. If you see a figure that still looks off, don’t panic. You can save and come back. Better yet, consult a tax agent near you – look for registered ones with offices in town like Kimathi Street or Upper Hill. A consultation might cost you Ksh 2,000-5,000, but it can save you tens of thousands in overpaid tax.
Remember, the goal is to file an accurate return. If KRA later asks for proof (a notice of query), you have your digital folder ready to send. No scrambling to get duplicates from NHIF offices in the August long rains.
What NOT to Do: Avoid These Common Pitfalls
Trying to be too clever can backfire. Never invent deductions or claim personal expenses as business costs. KRA’s data matching is getting smarter.
- Don’t claim rent relief if you don’t have a valid tenancy agreement. The proposed housing levy is different and not yet a deductible.
- Don’t ignore income. Declare all of it, including that occasional freelance gig paid via M-Pesa. Under-declaring is riskier than over-claiming a deduction.
- Don’t forget to claim carried-forward losses. If your side hustle made a loss last year, you can offset it against this year’s profit. Many people forget this.
Your Action Plan Before Filing Returns
- Gather: Collect all your 2023 certificates (NHIF, NSSF, Insurance, Bank Interest).
- Calculate: Add up your total allowable deductions. Use the KRA tax calculator as a guide.
- Reconcile: Check your monthly payslip totals against your P9 form from your employer.
- File Early: Aim to submit by mid-June. Beat the system crush and peace of mind is priceless.
- Keep Records: Store all supporting documents for at least 5 years. A simple WhatsApp chat backup isn’t enough.
Reducing your tax bill legally is about being proactive, not creative. It’s using the tools the system already provides to keep more of your hard-earned money. From boosting your pension to meticulously tracking your side hustle fuel costs, each action adds up to a smaller, fairer tax payment.
Don’t let the June deadline find you unprepared. Log into iTax today, review your statements, and start claiming what’s rightfully yours. Got a tax-saving tip that worked for you? Share it in the comments to help out another Kenyan!