Once you own more than one rental property, tax gets more complicated: more rent, more costs, perhaps different agents and tenants. The principles are the same, but you need a clear way to collect the figures and a clear view of the limits that apply to your total.

One taxpayer, one return

Your tax is charged on you, not on each property. For the monthly route, you file one monthly rental income return that covers the gross rent from all your residential properties, with the details of each. For the annual route, your rental income is reported in your annual return, with a schedule of income and expenses for each property.

The limits apply to the total

The flat tax is available when your gross residential rent for the year is between KES 288,000 and KES 15 million. The limits apply to all your residential rent combined, not to each property. A landlord with five units at KES 400,000 a year each has KES 2,000,000 in total, which is within the range. If the total passes KES 15 million, the annual route applies.

Keeping each property separate

For good decisions and good records, track each property on its own:

  • Rent due and rent received by unit
  • Costs by property: repairs, agent fees, rates, insurance, interest
  • Any loan on the property and its interest
  • Withholding tax certificates and the agent who issued them

The rental property and tenant register lists each unit, and the rental income annual tax computation workbook works out rent and costs property by property and compares the two tax routes. Compare properties' performance with the rental property investment analyser.

Mixing residential and commercial

Commercial rent is outside the flat tax and is taxed on the annual route, and VAT may apply; see VAT on commercial rent. Keep the two kinds of income apart from the start.

Agents and withholding

If different agents manage different properties, collect a monthly statement from each. Agents appointed by KRA withhold 7.5% on residential rent. Make sure you claim every credit; see withholding tax on rent. The withholding tax on rent calculator shows the amounts.

Choosing between the routes

With several properties the annual route can win if costs and loan interest are high on some of them, while the flat tax wins on mostly paid-off, low-cost properties. You choose for all your residential rent, not property by property, so test the total in the rental income tax calculator and read monthly rental income tax or annual tax.

A monthly routine for a portfolio

  1. Issue receipts and update the register on the day rent arrives.
  2. On the last day of the month, total rent by property.
  3. File and pay the monthly return by the 20th.
  4. Log the payment in the tax payments log.
  5. At year end, add up costs by property for the annual return.

Look ahead

Owning several properties also affects your plans to sell; see selling a property: the capital gains tax steps. And keep the records described in the records every landlord should keep.

Rules about the limits and the routes are revised by Finance Acts. Confirm them with KRA or a registered tax agent.

Common questions

Do I file separately for each property? No. The rent from all your properties is added together and declared on one return, with the details of each property recorded for your own file.

Do the monthly rental income limits apply per property? They apply to your total residential rent for the year, not property by property. Add up all your rent to see whether you are within the limits.

What if a co-owner and I share the property? Each owner declares their own share of the rent, based on the ownership shares, on their own return and PIN.