KRA MRI Tax: What Kenyan Landlords Need to Know

"What's MRI tax?"

I get this question a lot. Landlords hear the term thrown around but aren't sure what it actually means.

MRI stands for Monthly Rental Income. It's KRA's simplified tax for residential landlords.

And the single most common mistake about it is the threshold. A lot of landlords (and a lot of websites) think it's monthly. It isn't. Get that wrong and you can owe KRA a year of tax you thought you didn't owe.

Let's dive in.

Table of Contents

• What is MRI Tax?
• MRI vs. Regular Income Tax: What's the Difference?
• The MRI Rate and Threshold
• Who Pays MRI?
• Monthly Filing: How It Works
• What Counts as "Rental Income"?
• Can't I Deduct Expenses Under MRI?
• What If Your Expenses Are High?
• Penalties for Non-Compliance
• Record Keeping for MRI
• Multiple Properties? Here's How It Works
• Joint Ownership: Whose Obligation?
• Common MRI Questions
• Simplifying Your MRI Filing
• Key Takeaways

What is MRI Tax?

MRI is a simplified tax on rental income from residential property in Kenya.

Instead of working out expenses, deductions and graduated tax rates, MRI applies one flat rate to the rent you actually received.

It's also a final tax. Once you've paid MRI on your rent, you don't declare that same rent again in your annual income tax return.

MRI vs. Regular Income Tax: What's the Difference?

Under MRI you pay 7.5% of gross rent. No deductions for mortgage interest, repairs or management fees.

The MRI Rate and Threshold

This is the part people get wrong, so read it twice.

MRI applies when your residential rent is more than KES 288,000 and not more than KES 15 million in a year.

That's per year, not per month. Roughly KES 24,000 to KES 1.25 million a month.

(KRA's own pages print the lower figure as both 280,000 and 288,000. If your yearly rent is right at that edge, confirm on iTax.)

Example 1: one flat

• Rent: KES 30,000 a month (KES 360,000 a year)
• That's above KES 288,000 a year, so MRI applies
• Tax: KES 30,000 × 7.5% = KES 2,250 a month

Example 2: a small block

• Rent: KES 500,000 a month (KES 6 million a year)
• Inside the band
• Tax: KES 500,000 × 7.5% = KES 37,500 a month

Notice there's no "tax-free first slice". Once you're in MRI, the 7.5% is on all of it.

Who Pays MRI?

MRI covers anyone earning residential rental income inside the band. KRA's penalty rules have separate figures for individuals and for companies, so it isn't only for individuals.

It does not cover:

• Commercial rent (shops, offices). That's declared in the annual return, at graduated rates or the corporate rate, with expenses allowed. Withholding tax on rent may also apply.
• Residential rent above KES 15 million a year. Same treatment as commercial.

Got both residential and commercial tenants in one building? KRA treats them differently, so keep the two streams separate in your records from day one.

Monthly Filing: How It Works

Deadline: on or before the 20th of the following month.

So April's rent is declared and paid by May 20th.

The process:

1. Log into iTax
2. Go to Returns, then File Returns, then Rental Income Tax
3. Select the tax period (the previous month)
4. Enter the gross rent you received
5. The system calculates 7.5%
6. Submit, generate the payment slip, and pay

Takes about 5 minutes once you know your numbers.

No rent at all that month? File a NIL return. That's what nil returns are for: a month with nothing received. Not a way of saying "I'm below the threshold".

What Counts as "Rental Income"?

This trips people up.

Include:

• Rent payments received (cash, M-Pesa, bank transfer)
• Service charge collected (if not separated)
• Advance rent received

Don't include:

• Security deposits (they're refundable)
• Rent invoiced but not received
• Utility reimbursements (if collected separately and passed through)

The key word is received. If a tenant didn't pay, don't declare that amount.

Can't I Deduct Expenses Under MRI?

No. That's the trade-off.

Under MRI you cannot deduct:

• Mortgage interest
• Property repairs
• Agent commissions
• Insurance premiums
• Management fees
• Advertising costs

You pay 7.5% on everything collected. Full stop. And because MRI is a final tax, there's no claiming these back later in your annual return either.

What If Your Expenses Are High?

This is where some landlords feel MRI is unfair. Big mortgage, big repairs, and you still pay 7.5% of gross.

You can leave MRI. The Residential Rental Income Tax Regulations let you elect out, and then your rent is taxed in your annual return instead, on profit after expenses, at the normal rates.

The rules on timing matter:

• Notify KRA at least three months before the end of your year of income. For most individuals that's the calendar year, so by the end of September.
• It takes effect the following year, not straight away.
• KRA has 60 days to acknowledge your notice. If it doesn't, the notice counts as received anyway.

Whether it saves you money depends on your expenses and your other income, because the annual rates are graduated and can go well above 7.5%. Run both numbers with a tax adviser before you send the letter.

Penalties for Non-Compliance

From KRA:

Say you collect KES 400,000 a month and miss three months:

• Tax due: KES 30,000 × 3 = KES 90,000
• Late filing: KES 2,000 × 3 = KES 6,000 (5% of 30,000 is only 1,500, so the 2,000 applies)
• Late payment penalty: 5% × KES 90,000 = KES 4,500
• Interest: roughly KES 1,800 if you catch up within the quarter

About KES 12,300 on top of the tax, for being three months late. It grows every month you wait.

Record Keeping for MRI

Even though MRI is simple, keep these records:

For each property:

• Tenancy agreements
• Rent payment records
• M-Pesa and bank statements
• Invoices issued

For tax purposes:

• Monthly iTax acknowledgement receipts
• Payment confirmations
• Your own monthly rent totals

Keep everything for 5 years.

Multiple Properties? Here's How It Works

Own several rental properties? MRI adds them together.

Example:

• Property A: KES 150,000 a month
• Property B: KES 100,000 a month
• Property C: KES 80,000 a month
• Total: KES 330,000 a month (KES 3.96 million a year)

That's inside the band, so: Tax = KES 330,000 × 7.5% = KES 24,750 a month

File one combined MRI return, not one per property.

Joint Ownership: Whose Obligation?

If you co-own a property (spouse, sibling, partner), each owner can declare their share, as long as the ownership documents support the split.

Be careful with the idea that splitting income "keeps you under the threshold". The threshold is KES 288,000 a year. Two spouses each declaring KES 200,000 a month are each at KES 2.4 million a year: both firmly inside MRI, both paying 7.5%. Splitting only changes anything for very small rents.

Common MRI Questions

Q: I only have one tenant who pays annually. When do I declare?

Declare in the month you receive the payment. If you receive KES 300,000 of annual rent in January, declare KES 300,000 for January. File NIL returns for the months with nothing received.

Q: My tenant pays late. Do I still file on time?

Yes. File based on what you actually received that month. If a tenant pays February's rent in March, it goes in your March return.

Q: What if I rent out a room in my own home?

It's residential rent, so it counts towards the same yearly total.

Q: Do I put my MRI rent in my annual income tax return too?

No. MRI is a final tax. Your annual return still exists for your other income, but the rent you've already paid MRI on stays out of it.

Simplifying Your MRI Filing

The hardest part of MRI isn't the calculation. It's knowing your numbers.

How much rent did you actually collect last month?

If you're tracking payments manually, this takes time. M-Pesa statements, bank records, notebooks.

Property management software takes the guesswork out. Every payment is recorded as it lands, so on filing day your monthly total is already there.

For the click-by-click iTax walkthrough, see how to file KRA rental income tax.

Key Takeaways

1. MRI is 7.5% of gross residential rent
2. It applies between KES 288,000 and KES 15 million a year, not a month
3. It's a final tax, with no expense deductions
4. File by the 20th of the following month, every month
5. NIL returns are for months with no rent received
6. Commercial rent, and rent over KES 15 million, go in the annual return instead
7. Keep records for 5 years

MRI makes landlord tax straightforward, once you know the threshold is yearly.

Need help tracking rental income for MRI filing? KodiSawa generates KRA-ready reports automatically. Try it free for 14 days.