KRA Rental Income Tax 2026: The Complete Guide for Kenyan Landlords

Last reviewed: August 2026. This guide is general information, not tax or legal advice. Tax rates and rules change — and a proposed change is not the same as the law in force. Confirm the current figures with KRA or a registered tax agent before you file. Sources are listed in the References section at the end.

If you own rental property in Kenya, you owe tax on the income it generates. That part isn't new. What catches most landlords off guard is how that tax gets calculated — because Kenya gives you two distinct routes, and picking the wrong one can cost you hundreds of thousands of shillings over time.

This guide breaks down everything you need to know about KRA rental income tax in 2026: which regime applies to you, what the rates are, when to file, and how to make sure you're not leaving money on the table.

How KRA Taxes Rental Income

The Kenya Revenue Authority treats rental income as a standalone category under the Income Tax Act. Whether you own a single bedsitter in Ruaka or a block of flats in Kilimani, KRA expects you to declare every shilling of rent you collect.

There are two tax regimes available to landlords:

1. Monthly Rental Income (MRI) Tax — a simplified flat-rate system
2. Annual Rental Income Tax — the traditional graduated-rate system under individual income tax

You don't get to switch back and forth at will. The regime you qualify for depends on your total annual rental income, and moving between them has rules. Let's look at each one.

MRI (Monthly Rental Income) Regime

The MRI regime was introduced to simplify things for landlords earning moderate rental income. Here's how it works:

Who qualifies: Landlords whose gross annual rental income is between KES 288,000 and KES 15,000,000. If you earn below KES 288,000/yr, you're exempt from rental income tax altogether. If you earn above KES 15M/yr, you must use the Annual regime.

Tax rate: A flat 7.5% on gross rental income, with no deductions allowed — the simplicity is the trade-off. (The rate was reduced from 10% to 7.5% by the Finance Act 2023, effective 1 January 2024. A proposed increase back to 10% was dropped before the Finance Act 2026 was passed — see What's Changing in 2026 below.)

Final tax: MRI is a final tax. Once you've paid the 7.5%, that residential rental income is settled — you don't re-declare it in an annual income tax return.

Filing frequency: Monthly. You file and pay by the 20th of the following month. Collect January rent? File and pay by 20th February.

Why landlords choose it: It's straightforward. You don't need to track receipts for repairs or insurance. You simply take 7.5% off the top and move on.

The catch: Because you can't claim deductions, the MRI regime can actually cost you more if your property has significant allowable expenses. A landlord spending heavily on maintenance, insurance, and management fees might pay less tax under the Annual regime — even though the headline rates are higher.

Annual Rental Income Tax Regime

The Annual regime folds your rental income into your overall individual income and applies Kenya's graduated tax bands.

Who qualifies: Any landlord can elect to use the Annual regime, and landlords earning above KES 15M/yr in gross rent must use it.

Tax rates (2026):

Key advantage: You can claim allowable deductions, which reduce your taxable income before these rates apply.

Filing deadline: Annual returns are due by 30th June of the following year. For the 2025 tax year, you file by 30th June 2026.

Allowable Deductions Under the Annual Regime

This is where most landlords either win big or lose big. Under the Annual regime, you can deduct legitimate expenses incurred in earning that rental income:

• Repairs and maintenance — fixing a leaking roof, repainting, plumbing repairs
• Property management fees — if you use an agent or platform to manage your property
• Insurance premiums — building and contents insurance
• Legal and professional fees — advocates, valuers, accountants
• Land rates and service charges — county government charges
• Interest on loans — the interest portion of your mortgage (not the principal)
• Bad debts — rent you've genuinely written off as uncollectable (with proper documentation)

Under the MRI regime, none of these are deductible. Your tax is simply 7.5% of gross rent collected.

Filing Deadlines and Penalties

Missing a deadline is one of the most expensive mistakes a Kenyan landlord can make.

MRI regime:

• Due by the 20th of the following month (filed via iTax / eRITS)
• Late filing penalty: the higher of 5% of the tax due or KES 2,000 (individual taxpayers)
• Late payment: a 5% penalty on the tax due, plus 1% per month interest on the unpaid amount until it's cleared

Annual regime:

• Due by 30th June of the following year
• Late filing penalty: the higher of 5% of the tax due or KES 2,000 (individual taxpayers)
• Late payment: a 5% penalty on the tax due, plus 1% per month interest on the unpaid amount until it's cleared

These penalties compound. A landlord who ignores MRI filings for six months doesn't just owe back taxes — they owe penalties and interest on each missed month. We've seen cases where the penalties exceed the original tax bill.

What's Changing in 2026 (Proposed vs In Force)

Tax rules move, and 2026 is an active year. Here's the line between what's law right now and what's only proposed:

• In force today: the MRI rate is 7.5% on gross residential rent (since 1 January 2024). The individual tax bands above are current. The penalties above are current.
• Settled — the increase did not happen: the Finance Bill 2026 (tabled 30 April 2026) proposed raising the residential rental rate from 7.5% back to 10% from 1 July 2026. That proposal was dropped during the parliamentary process. The Finance Act 2026, assented on 23 June 2026, left the residential rate at 7.5%. The Act did introduce a separate charge for non-resident landlords — a non-resident rental income tax under new section 6B, charged at the rate in the Third Schedule (30% for immovable property) and stated in the Act to be a final tax, in force from 1 July 2026 (see below).

A Bill is a proposal, and 2026 shows why that distinction matters: the increase was dropped before assent, so the 7.5% rate still stands. Always file at the rate actually in force for the period you're declaring.

If You Are a Non-Resident Landlord

The Finance Act 2026 did change one thing materially, and it lands on landlords living outside Kenya. New section 6B of the Income Tax Act creates a non-resident rental income tax on income "accrued in or derived from the use or occupation of property situated in Kenya", charged at the rate specified in the Third Schedule and stated in the Act to be a final tax on the income. For immovable property — land and buildings — that Third Schedule rate is 30%. The Act commenced on 1 July 2026.

Section 6B also sets out how it is accounted for: you register through a simplified registration framework prescribed by the Commissioner, then submit a return and pay on or before the twentieth day of the month following the month for which the rent is paid.

There is one carve-out, and it matters if someone collects rent for you in Kenya. Those registration and filing duties do not apply where the rent is received by a resident person on your behalf and is subject to withholding under section 35(1)(c) — the tax then reaches KRA by deduction rather than through a return of your own. Read that precisely: it lifts the filing obligation, not the tax.

Worth being precise about the two rails: the 7.5% MRI rate is for resident landlords (section 6A). Residency for tax is not the same question as citizenship or which passport you hold, so if you split your year between Kenya and somewhere else, confirm your status — and which rail you are on — with KRA or a registered tax agent before your first filing.

Common Mistakes Landlords Make

These are the patterns we see over and over among Kenyan landlords:

1. Filing Under the Wrong Regime

Take a landlord earning KES 900,000/yr in rent with KES 450,000 in genuine deductible expenses. Under MRI they pay 7.5% of gross — KES 67,500. Under the Annual regime, tax is charged on the KES 450,000 net: after the graduated bands and personal relief, the bill works out to roughly KES 44,000. Here the Annual regime wins. But flip it around — a landlord earning KES 8M/yr with modest expenses is almost always better off on MRI's flat 7.5%, because the Annual bands climb to 30%+ on net income above KES 388,000. The point isn't that one regime is always cheaper — it's that you have to run both. Many landlords default to MRI for simplicity, or assume Annual is cheaper "because deductions," without doing the math.

2. Missing Deductions

Under the Annual regime, every unclaimed deduction is money left on the table. The landlord who pays KES 180,000/yr in insurance but doesn't claim it is effectively donating that tax saving to KRA.

3. Not Reporting All Properties

Some landlords report income from one property but "forget" another. KRA's data matching — especially with eTIMS and land registry integration — is getting sharper every year. Discrepancies trigger audits.

4. Poor Record-Keeping

You can't claim a deduction you can't prove. Receipts stuffed in a drawer or M-Pesa statements you never downloaded won't survive a KRA query. You need organised, timestamped records tied to specific properties and expenses.

5. Confusing Capital Expenditure with Repairs

Building a new perimeter wall is capital expenditure — not deductible as an expense. Repairing an existing wall is maintenance — deductible. KRA draws this line strictly, and getting it wrong can trigger reassessment.

How PropTraka Handles This for You

Tax compliance shouldn't require a degree in accounting. Here's what happens when you manage your properties through PropTraka:

Automatic expense categorisation. Every expense you log — whether it's a plumber's bill paid via M-Pesa, an insurance renewal, or a management fee — gets categorised by ARDO™, PropTraka's AI engine. ARDO knows the difference between a deductible repair and capital expenditure, and flags anything ambiguous for your review.

Regime comparison. PropTraka calculates your tax liability under both MRI and Annual regimes so you can see exactly which one saves you more. No guesswork, no spreadsheets.

eTIMS-ready receipts. Every rent payment generates a clean, organised receipt automatically. eTIMS invoicing in PropTraka is coming soon — it's being rolled out subject to KRA go-live, not live yet. Once it goes live and you've connected your KRA eTIMS (OSCU) credentials in settings, PropTraka will issue the eTIMS invoice with its fiscal signature too — no logging into the portal.

Filing-ready reports. When tax season arrives, PropTraka generates reports that map directly to what KRA expects — income summaries, expense breakdowns by category, and supporting documentation. Your accountant will thank you.

Deadline reminders. Whether you're on MRI or Annual, PropTraka tracks your filing deadlines and nudges you before they hit. No more penalty surprises.

The Bottom Line

Rental income tax in Kenya isn't optional, and the cost of getting it wrong — penalties, interest, audits — far exceeds the cost of getting it right. The two things every landlord needs are: (1) clarity on which regime works best for their situation, and (2) organised records that make filing painless.

That's exactly what PropTraka was built to do.

Start your free 30-day trial and see how much simpler tax compliance becomes when your property management platform handles the heavy lifting.

References

• Income Tax Act (Cap 470), Laws of Kenya — rental income taxation and the Third Schedule rate.
• Tax Procedures Act, 2015 (Cap 469B) — filing deadlines, late-filing and late-payment penalties, and interest.
• Finance Act, 2023 — reduction of the residential rental income tax rate from 10% to 7.5%, effective 1 January 2024.
• Finance Act, 2026 (Kenya Gazette Supplement No. 157, Acts No. 19; published 26 June 2026, commencement 1 July 2026) — the proposed increase of the residential rental rate to 10% was dropped and did not become law; the residential rate remains 7.5%. Section 4 inserts section 6B into the Income Tax Act, creating a non-resident rental income tax at the Third Schedule rate (30% for immovable property) as a final tax, with registration through a simplified framework and returns due by the twentieth day of the following month.
• Kenya Revenue Authority — Residential Rental Income Tax and individual income tax guidance, kra.go.ke.

Verify current rates and thresholds at kra.go.ke or with a registered tax agent before filing.