Disputes between landlords and tenants nearly always come down to paper: did the rent get paid, and what happened to the deposit? A simple system of receipts and records avoids most of them and keeps your tax figures right.

Receipts for rent

Give the tenant a receipt for every payment, whether it is cash, M-Pesa, bank transfer or cheque. A good receipt shows:

  • A unique receipt number
  • The date, tenant name and unit
  • The period the rent covers
  • The amount and the method of payment, with the M-Pesa code or bank reference
  • The name of the person receiving it

Never reuse or skip a number. The free rent receipt book issues numbered receipts, keeps a register of every payment and totals the rent for the month, which is the figure you use for your monthly rental income return. See how to file a monthly rental income return.

Why receipts matter for tax

Your tax is worked out on rent. A register of receipts proves what you received, and a gap invites questions. If tenants or agents withhold tax from rent, the receipt should show the gross rent and the tax withheld; see withholding tax on rent.

Handling deposits

A deposit is money you hold on behalf of the tenant, to cover unpaid rent or damage. Treat it with care:

  • State the amount and the purpose in the tenancy agreement.
  • Give a receipt showing it is a deposit and not rent.
  • Keep it separate from your own money where you can.
  • Do not treat it as income while you hold it. It becomes income only if you keep it, for example to cover unpaid rent.

Returning a deposit

At the end of the tenancy, inspect the unit with the tenant, compare it with the condition recorded at the start and agree any deductions in writing. Return the balance promptly and record the refund. Photos taken at the start and the end are the best evidence for both sides.

Records to keep

The rental property and tenant register lists each unit, tenant, lease dates, rent and deposit held, and counts vacant units. The tax payments log keeps your tax receipts. Read the records every landlord should keep for the full list.

When rent is late

Record every late payment and the reminders you sent. If a tenant leaves owing rent, you may be able to treat it as a bad debt on the annual route; see unpaid rent and bad debts. The rental income tax calculator helps you see the tax effect of rent you did not receive.

A simple monthly routine

  1. Issue receipts on the day rent arrives.
  2. Update the register.
  3. Reconcile the register to your bank and M-Pesa on the last day of the month.
  4. File and pay your monthly rental income tax by the 20th.

Receipts and deposits connect to the rest of your landlord records. See filing for several rental properties if you manage more than one unit, and deductible expenses for landlords for what you can claim against the rent. The rental property investment analyser helps you judge whether each unit is earning its keep.

Tenancy law and tax rules both apply. Confirm your obligations with a lawyer or KRA.

Common questions

Must a landlord give a receipt for every payment? It is good practice and protects both sides. A numbered receipt shows the date, amount, period covered and the payment method, and it is the evidence you will need if there is a dispute or a tax query.

Is the deposit income for the landlord? A refundable deposit held as security is not income when it is received. It becomes income only if you keep part of it, for example to cover damage or unpaid rent. Record where the deposit is held and why any deduction was made.

How quickly should a deposit be refunded? Follow the tenancy agreement. Inspect the unit on exit, compare with the move-in inventory, agree deductions for damage beyond normal wear and tear, and refund the balance with a written statement as soon as the keys are returned.