Landlord Tax in Malaysia: How Rental Income Is Taxed and What You Can Deduct
Edited by Teh Kim Guan, ACMA, CGMA · Updated 2026-06-24
Rental income is taxable in Malaysia, but most landlords pay far less than they expect once they understand what they can deduct. Your rental profit after allowable expenses is added to your other income and taxed at the same progressive rates as salary, ranging from 0% to 30% for residents (Year of Assessment 2025).
This guide explains exactly how LHDN treats rental income, which expenses reduce your tax bill, and how the 50% residential exemption works.
Is your rental income a business or a passive source?
This is the first question LHDN asks, because the answer determines which deductions you can claim.
Passive letting (Section 4(d)) applies when you simply collect rent without providing hotel-style services such as housekeeping, meal service, or daily linen changes. Most residential landlords fall here.
Business letting (Section 4(a)) applies when you furnish substantial maintenance or support services alongside the accommodation. Short-term Airbnb-style operations where you provide daily cleaning, concierge, or similar services may be classified as a business source, which opens up different deduction rules including capital allowances.
The classification matters. Under Section 4(d), you cannot claim capital allowances on furniture or fittings; under Section 4(a), you may. If you are unsure which category applies, consult a registered tax agent or refer to LHDN Public Ruling No. 12/2018.
How net rental income is calculated
You are taxed on net rental income, not gross rent.
Net rental income = Gross rent received – Allowable deductionsThat net figure is then added to your other income sources (employment, business, dividends, and so on) to arrive at your total chargeable income for the year.
What you can deduct (allowable expenses)
LHDN allows deductions for expenses that are wholly and exclusively incurred in producing the rental income. The main categories are:
1. Quit rent and parcel rent (Cukai Tanah / Cukai Petak)
Annual land tax payable to the state land office. For strata-title units, parcel rent replaces quit rent. Both are fully deductible in the year they are paid.
2. Assessment tax (Cukai Taksiran / Cukai Pintu)
Local council charges billed twice a year by your local authority (DBKL, MBPJ, MBSJ, and others). Assessment tax is a direct cost of holding the property and is fully deductible.
3. Mortgage interest
Only the interest portion of your monthly loan repayment is deductible, not the principal. If your monthly repayment is RM 1,800 and your bank statement shows RM 900 as interest, only RM 900 per month is deductible. Request an annual interest statement from your bank for accurate figures.
4. Fire insurance and hazard insurance premiums
Premiums paid to insure the rental property itself (building and contents used by the tenant) are deductible. Life insurance on the borrower is not.
5. Repairs and maintenance
Costs to keep the property in its original rentable condition are deductible. Examples include repainting worn surfaces, fixing a leaking roof, replacing a broken door lock, servicing air-conditioners already in the property.
6. Management fees and service charges
For stratified properties, maintenance charges and sinking-fund contributions paid to the Joint Management Body (JMB) or Management Corporation (MC) are deductible.
7. Rental agent commission (for renewals)
Commission paid to an agent for renewing a tenancy is deductible. Commission for the first letting of a property is treated as a capital (non-deductible) cost.
What you cannot deduct
| Expense | Why it is not deductible |
|---|---|
| Loan principal repayment | Capital, not revenue expense |
| Initial renovation and fitting-out costs | Capital improvement |
| Legal fees and stamp duty on first tenancy | Capital/preliminary expense |
| Agent commission for first letting | Capital expense |
| Personal expenses during vacancy | Not incurred to earn rental income |
| Depreciation of furniture (Section 4(d)) | Capital allowance not available for passive letting |
The 50% residential rental income exemption
The government introduced a 50% tax exemption on rental income from residential dwellings to encourage landlords to offer accommodation at affordable rates.
Conditions to qualify (as at YA 2025):
- The landlord must be a Malaysian resident individual (not a company).
- The property must be a residential dwelling (house, apartment, condominium, and so on).
- Monthly rent from that property must not exceed RM 2,000 per unit.
- A proper tenancy agreement must be in place.
- The exemption applies for each unit that meets the criteria.
If you rent out two units at RM 1,800 per month each, both qualify. If one unit earns RM 2,500 per month, that unit does not qualify.
How the exemption works in practice:
You first deduct allowable expenses from gross rent to arrive at net rental income. You then apply the 50% exemption to that net figure. Only the remaining 50% is added to your chargeable income.
Example: Gross rent RM 24,000 per year, allowable expenses RM 6,000, net rental income RM 18,000. Apply 50% exemption: taxable portion = RM 9,000. That RM 9,000 is added to your salary or other income and taxed at your marginal rate.
Claim this exemption in your Form BE or Form B under the “Statutory Income from Rent” section. Supporting documents (tenancy agreement, rent receipts, expense receipts) should be retained for seven years in case of audit.
Tax rates for resident individuals (YA 2025)
| Chargeable income (RM) | Tax rate |
|---|---|
| 0 to 5,000 | 0% |
| 5,001 to 20,000 | 1% |
| 20,001 to 35,000 | 3% |
| 35,001 to 50,000 | 8% |
| 50,001 to 70,000 | 13% |
| 70,001 to 100,000 | 21% |
| 100,001 to 250,000 | 24% |
| 250,001 to 400,000 | 24.5% |
| 400,001 to 600,000 | 25% |
| 600,001 to 1,000,000 | 26% |
| Above 1,000,000 | 30% |
Source: LHDN, YA 2025. Rates apply to total chargeable income from all sources, not rental income alone.
Non-resident landlords pay a flat 30% on net rental income with no personal reliefs available.
Filing deadlines for rental income (YA 2025)
| Taxpayer type | Form | e-Filing deadline |
|---|---|---|
| Employee with rental income | BE | 15 May 2026 |
| Self-employed / business owner with rental income | B | 15 July 2026 |
File via MyTax using your MyKad and LHDN PIN. Rental income is declared under “Statutory Income from Rent” in the form.
Practical record-keeping tips
- Keep a separate folder (physical or cloud) per rental unit with tenancy agreements, council bills, insurance certificates, and loan statements.
- Download your bank’s annual interest certificate every January. Banks issue these for mortgage loans and they are essential to calculate the deductible interest portion.
- Take photos of the property before and after each tenancy to support repair and maintenance claims.
- Issue official receipts for rent collected. For rentals above RM 500 per month, LHDN e-invoice requirements are being progressively rolled out: check the latest thresholds at hasil.gov.my.
For a broader look at property-related costs, see How Much Does It Actually Cost to Buy Property in Malaysia and Understanding Property Gains Tax in Malaysia.
Key takeaways
- Rental income is taxable at progressive resident rates (0% to 30%) on your net rental income after expenses.
- Deductible expenses include quit rent, assessment tax, mortgage interest (not principal), insurance, repairs, management fees, and renewal agent commissions.
- Non-deductible items include loan principal, initial renovation, capital improvements, and first-letting agent fees.
- A 50% tax exemption applies to net rental income from residential units rented at no more than RM 2,000 per month, available to resident individuals.
- Non-resident landlords pay a flat 30% with no reliefs.
- File via MyTax under Form BE (employees) by 15 May 2026 or Form B (business owners) by 15 July 2026 for YA 2025.
- Retain all supporting documents for seven years.
Frequently asked questions
Do I need to declare rental income if my tenant pays RM 800 a month?
Yes. There is no minimum threshold below which rental income is exempt from declaration. The 50% exemption reduces your taxable amount, but you are still required to declare all rental income received. LHDN cross-checks rental data from tenancy stamp-duty records.
Can I deduct the full monthly loan repayment?
No. Only the interest portion is deductible. The principal repayment is a capital repayment and cannot be claimed against rental income. Check your bank’s monthly statement for the interest-to-principal breakdown.
My property was vacant for three months. Can I still claim expenses for that period?
You can claim expenses that continue during the vacancy (quit rent, assessment, loan interest, insurance) as long as you genuinely intend to rent the property out again and are actively seeking a new tenant. Expenses during periods when you occupy the property yourself are not deductible.
What if I rent out only one room in my own home?
You are still required to declare that rental income. You can apportion allowable expenses (such as assessment tax and quit rent) based on the proportion of floor area rented. The 50% exemption applies if the room is in a residential dwelling and rent does not exceed RM 2,000 per month.
Does the 50% exemption apply to commercial or shop-office properties?
No. The 50% residential rental income exemption applies only to residential dwellings. Rental income from commercial properties, shoplots, and industrial units is fully taxable without this exemption.
Information in this guide reflects Malaysian tax law as at YA 2025. Tax rules change: always verify current rates and exemptions with LHDN or a licensed tax agent before filing.
Malaysia-based chartered management accountant (ACMA, CGMA) and embedded executive who has worked across finance, operations, and product roles with Malaysian companies. Every WangWise guide is checked against official Malaysian sources. How we review · About the editor
Educational content only, not financial advice. Verify current figures with official sources.