iTax Compliance for Landlords: What You Need to Know About Filing Rental Income Tax & Capital Gains Tax in 2026

With Kenya’s real estate sector continuing to expand and the Kenya Revenue Authority (KRA) increasing digital enforcement through iTax, landlords are now expected to remain fully tax-compliant in how they declare their rental income and property transactions.

Whether you are renting out residential units, commercial spaces, or selling land & houses, 2026 introduces stricter compliance tracking, higher transparency, and automated penalties for non-filers.

This guide explains everything landlords should know, including:

✔ Rental Income Tax
✔ Capital Gains Tax (CGT)
✔ Filing Procedures via iTax
✔ Deductions, Records & Penalties
✔ Best Compliance Practices for 2026

1. Why Landlords Must Pay Tax on Property Income

In Kenya, any income generated from renting out property is considered taxable income under the Income Tax Act.
This applies whether you are:

• A landlord with multiple units

• A homeowner renting a portion of your residence

• A property investor

• A company managing rental estates

KRA now matches property ownership data from:

✓ Land Registry
✓ County Planning & Building Permits
✓ Utility Meter Registrations
✓ Bank Rental Cashflows
✓ Estate Management Systems

— making tax evasion increasingly detectable.

2. Types of Property Taxes Landlords Must Comply With in 2026

There are two major tax obligations for landlords:

A. Rental Income Tax

Tax charged on income earned from renting property in Kenya.

There are two categories:

i. Residential Rental Income

Applies to landlords earning Ksh 288,000 – 15,000,000 per year from residential property.

• Rate:7.5% of gross rental income

• Filing Frequency: Monthly

• Deadline: 20th of the following month

Key Benefit:
No need to account for expenses or deductions — the tax is final.

ii. Commercial Rental Income

If your rental income exceeds Ksh 15 million per year, you move to corporate or individual income tax bands, and must keep full books of accounts.

• Taxed at normal corporate/individual taxation rates

• Deductible expenses apply (repairs, agent fees, interest, utilities, etc.)

B. Capital Gains Tax (CGT)

Applied when you sell land, apartments, houses, or commercial buildings.

• CGT Rate (2026): 15% of net gain

• Filing: On iTax within 30 days of sale

• Applies to both companies & individuals

CGT is triggered when you dispose of property through:
✔ sale
✔ transfer
✔ gifting
✔ inheritance (in some cases)

3. Filing Rental Income Tax on iTax (2026 Process)

Step-by-Step Guide for Landlords

1. Log in to the iTax Portal
   👉 itax.kra.go.ke

2. Select: Returns → Rent Income Return

3. Choose the Month Being Filed

4. Enter the Monthly Gross Rental Amount

5. System Auto-Calculates Tax (7.5%)

6. Submit & Generate Payment Slip

7. Pay via:

   • M-Pesa Paybill

   • Bank

   • RTGS

   • Card (for some banks)

8. Receipt Confirmation and Filing Complete

4. Filing Capital Gains Tax (CGT) on iTax

When selling real estate:

1. Declare the selling price

2. Declare the acquisition cost

3. Declare transfer expenses (legal, stamp duty, valuation, agent fees)

4. Compute net gain

5. CGT = 15% of the net gain

CGT must be paid before the transfer can be completed.

Transfer documents now require CGT proof.

5. Rental Income Tax Deductions (Commercial Landlords)

Commercial landlords may deduct:

✔ Repairs & maintenance
✔ Property management fees
✔ Agent commissions
✔ Mortgage interest
✔ Insurance premiums
✔ Utility expenses borne by landlord
✔ Legal fees & valuation fees
✔ Depreciation (wear & tear allowances)

6. Records Landlords Should Maintain in 2026

To avoid compliance disputes, maintain:

📌 Lease agreements
📌 Rent collection schedules
📌 Bank statements
📌 Utility bills
📌 Expense receipts & invoices
📌 Property ownership documents
📌 Sale agreements (CGT cases)
📌 Valuation reports

Digital recordkeeping is strongly recommended.

7. Penalties for Non-Compliance in 2026

KRA enforces automatic penalties on iTax for late filing or failure to declare:

Banks, lawyers, and land registries now cannot process property transfers without CGT clearance.

8. Common Misconceptions by Landlords

❌ “I don’t need to pay tax because tenants pay in cash”
→ KRA now tracks deposits & meter registrations.

❌ “Only companies pay rental tax”
→ Individuals & partnerships also pay.

❌ “CGT only applies to large investors”
→ Applies even to single-property disposals.

9. Who is Exempt from Capital Gains Tax?

Some exemptions include:

✔ Transfer between spouses
✔ Transfer to immediate family upon death
✔ Government compulsory acquisition
✔ Charitable institutions (conditions apply)

10. Why Compliance Matters for Landlords in 2026

Property tax compliance benefits landlords by:

✔ Avoiding penalties & audits
✔ Speeding up property transfers
✔ Attracting corporate tenants
✔ Improving access to bank financing
✔ Building investor credibility

Banks and REITs now require tax compliance for financing deals.

11. How Real Estate Platforms Like Masion.co.ke Help

For landlords listing on Masion.co.ke, compliance ensures:

✓ Transparent rental pricing
✓ Trust from tenants & investors
✓ Faster deal completion
✓ Documentation support for property sales
✓ Boosted professional image in the market

12. Final Advice to Landlords for 2026

To stay compliant:

✔ File monthly rental tax
✔ Declare CGT on sales promptly
✔ Keep accurate records
✔ Use property management systems
✔ Consult tax professionals when needed

Real estate continues to be one of Kenya’s strongest investment sectors, but as regulation digitizes, compliance is no longer optional. Through KRA’s iTax platform, taxation has become streamlined — but enforcement has also become more stringent.

Landlords who stay compliant position themselves for:

🏡 Stronger returns
📈 Higher asset liquidity
🤝 Better financing access
📜 Fewer legal & administrative delays

As the property market matures, compliance becomes a competitive advantage.