A common question from employees is whether the bus fares, airtime, internet bills or work clothes they pay for can be deducted from tax. The honest answer is that, for most employees, general work costs are not deductible against employment income. That sounds harsh, but there are other routes that help, and knowing them keeps you from claiming something you cannot support.

The basic rule for employment income

PAYE is charged on your pay and benefits, with a small number of allowed deductions and reliefs. Costs you choose to incur to do your job, such as commuting, a phone you use for work or a home office, are not usually deducted from your taxable pay. This is different from a business owner, who can deduct expenses incurred to earn business income; see expenses small businesses can deduct for that side.

What you can claim

The deductions and reliefs that are available to employees include:

The tax reliefs calculator shows how each of these changes the tax on your pay.

Reimbursements from your employer

If your employer reimburses you for a genuine business cost, such as travel on a work trip supported by receipts, the money is generally not income to you. The key is that it must be a repayment of money you spent for the business, backed by proof, and not a disguised pay increase. A fixed monthly "allowance" paid whether or not you spent anything is normally taxable. Read taxable allowances and company benefits and per diem and staff meals: exemptions raised for the difference.

Keeping a proper claim

When you claim a reimbursement, submit a receipt, say what the cost was for and get it approved. The expense claims and reimbursement log is a simple way for a small team to record claims, status and payments. Employees should keep their own copies as well.

When you earn other income as well

If you work for an employer and also run a side business, your business expenses can be deducted against your business income, not your salary. Keep the two separate. Side hustle income for employees explains the rules, and the records you need are described in how to keep business records for KRA.

Benefits you receive

Instead of claiming costs, you may receive benefits such as a company car, housing or a loan. These are taxed on the employer's side or as part of your pay, depending on the benefit. See company car and housing benefits and employer loans and salary advances: tax treatment. The taxable benefits calculator estimates the amount added to your pay.

What to do if you think you are owed a deduction

Check whether your situation fits one of the allowed reliefs. Gather the supporting document, such as a policy certificate or pension statement, and ask your employer's payroll to apply it, or claim it on your annual return. If you have paid too much tax, how to claim a PAYE refund describes the process.

The practical lesson

Do not spend on the assumption that work costs will reduce your tax. Ask your employer whether they reimburse or provide what you need, claim the reliefs you are entitled to and keep your documents. Where a cost is truly a business cost of a second income, record it properly there. Claiming what the rules do not allow leads to penalties, so ask KRA or an adviser when you are unsure.

An example

Suppose you spend KES 3,000 a month on airtime and transport for work, and your employer does not reimburse it. That KES 36,000 a year does not reduce your taxable pay. If instead your employer agrees to reimburse the airtime against receipts, the money you receive is a repayment, not pay, and you are not taxed on it. The cost is the same, but the treatment depends entirely on how the arrangement is set up, so raise it with your employer before you spend, not after.