KRA MRI (Monthly Rental Income) Tax: What 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 system for landlords.

And understanding it could save you thousands in penalties — or help you realize you might be overpaying.

Let's dive in.

Table of Contents

• What is MRI Tax?
• MRI vs. Regular Income Tax: What's the Difference?
• The MRI Tax Rate and Threshold
• Who Qualifies for MRI?
• Monthly Filing: How It Works
• What Counts as "Rental Income"?
• Can't I Deduct Expenses Under MRI?
• When Regular Income Tax Makes More Sense
• How to Opt Out of MRI
• 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 tax is a simplified tax regime specifically for rental income in Kenya.

Instead of calculating deductions, expenses, and graduated tax rates, MRI applies a flat percentage to your gross rental income.

It was introduced to make tax compliance easier for landlords. Before MRI, rental income was taxed under the regular income tax system — which meant more paperwork, more complexity, and more room for errors.

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

Here's the key distinction:

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

Under regular income tax, you can deduct allowable expenses — but the remaining profit is taxed at higher graduated rates.

The MRI Tax Rate and Threshold

Let's get specific.

Current MRI rates (2026):

If you collect less than KES 288,000 per month across all your rental properties, you pay zero tax.

But here's the catch: you still need to file monthly returns. Even nil returns.

Example 1: Below threshold

• Monthly rent: KES 200,000
• Tax due: KES 0
• Still must file? Yes

Example 2: Above threshold

• Monthly rent: KES 500,000
• Tax due: KES 500,000 × 7.5% = KES 37,500

Who Qualifies for MRI?

MRI is available to:

• Individual landlords (not companies)
• Earning rental income from residential property
• Earning rental income from commercial property

If you're a corporate landlord (company-owned property), you fall under corporate income tax — not MRI.

Monthly Filing: How It Works

Unlike annual tax returns, MRI is filed monthly.

Deadline: 20th of the following month

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

The process:

1. Log into iTax
2. Go to Returns → File Returns → Rental Income Tax
3. Select the tax period (previous month)
4. Enter gross rental income
5. System calculates tax automatically
6. Submit and pay (if above threshold)

Takes about 5 minutes once you know your numbers.

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.

MRI's simplicity comes at a cost: no expense deductions.

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.

When Regular Income Tax Makes More Sense

Here's where it gets interesting.

If your allowable expenses exceed roughly 25% of rental income, you might pay less under the regular income tax system.

Example:

Monthly rent: KES 500,000 Allowable expenses: KES 200,000 (40%) Net income: KES 300,000

Under MRI: KES 500,000 × 7.5% = KES 37,500/month

Under regular tax (estimated): ~KES 25,000-30,000/month

The math varies based on your specific situation. If you have:

• Large mortgage payments
• Major renovation expenses
• High property management fees

...talk to a tax advisor about opting out of MRI.

How to Opt Out of MRI

You can choose the regular income tax system instead. Here's how:

1. Write to your KRA Tax Service Office
2. Request to be removed from MRI regime
3. You'll then file rental income under regular income tax (annually)

Once you opt out, you must stay out for at least 2 years before switching back.

Most small landlords stick with MRI. The simplicity outweighs minor tax savings.

Penalties for Non-Compliance

KRA doesn't play around. Here's what happens if you skip MRI obligations:

A landlord collecting KES 400,000/month who misses 3 months of filing?

Tax due: KES 30,000 × 3 = KES 90,000 Late filing penalty: KES 20,000 × 3 = KES 60,000 Late payment: 5% × KES 90,000 = KES 4,500 Interest: ~KES 2,700

Total: KES 157,200 instead of KES 90,000.

File on time. Always.

Record Keeping for MRI

Even though MRI is simple, keep these records:

For each property:

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

For tax purposes:

• Monthly iTax acknowledgment receipts
• Payment confirmations
• Annual rental income summaries

Keep everything for 5 years. KRA can audit anytime within that window.

Multiple Properties? Here's How It Works

Own several rental properties? Your MRI calculation aggregates everything.

Example:

• Property A: KES 150,000/month
• Property B: KES 100,000/month
• Property C: KES 80,000/month
• Total: KES 330,000/month

Since total exceeds KES 288,000, you pay tax on the full KES 330,000: Tax = KES 330,000 × 7.5% = KES 24,750

File one combined MRI return — not separate returns per property.

Joint Ownership: Whose Obligation?

If you co-own property with someone (spouse, sibling, partner), you have options:

1. Split the income — Each owner declares their share
2. One person declares all — Simpler but may push you above threshold

Married couples often split rental income to stay below the KES 288,000 threshold.

Example:

• Total rent: KES 400,000
• Husband declares: KES 200,000 (below threshold, no tax)
• Wife declares: KES 200,000 (below threshold, no tax)
• Combined tax: KES 0

Vs. one person declaring KES 400,000:

• Tax: KES 400,000 × 7.5% = KES 30,000

Legal and smart tax planning. Just ensure ownership documents support the split.

Common MRI Questions

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

Declare in the month you receive payment. If you receive KES 300,000 annual rent in January, declare KES 300,000 for January only. File nil returns for other months.

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

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

Q: Can I switch between MRI and regular tax each year?

No. You must stay in your chosen system for at least 2 years.

Q: What if I rent out a room in my primary residence?

Still taxable under MRI. The threshold applies to total rental income, regardless of property type.

Simplifying Your MRI Filing

The hardest part of MRI isn't the tax 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 eliminates this. Every payment is recorded automatically. When filing day comes, export your totals and file in minutes.

Key Takeaways

1. MRI is a simple 7.5% tax on gross rental income above KES 288,000/month
2. File monthly, even if below threshold (nil returns)
3. No expense deductions allowed under MRI
4. Deadline is 20th of the following month
5. Penalties for late filing/payment are severe
6. Consider regular income tax if expenses exceed 25% of rent
7. Keep records for 5 years

MRI makes landlord taxation straightforward. As long as you file on time, stay organized, and know your numbers, you'll be fine.

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