Rental Income Tax Malaysia: How Property Owners Are Taxed (YA 2025)
What expenses landlords can deduct, repairs vs improvements, furnished property allowances, and Airbnb tax obligations.
Is Rental Income Taxable?
Yes. All rental income received from property in Malaysia is subject to income tax. This applies to residential properties, commercial properties, land rentals, and short-term rentals (Airbnb, homestay).
You are NOT taxed on gross rent. You are taxed on net rental income after deducting allowable expenses.
Allowable Expenses You Can Deduct
| Expense | Deductible? | Notes |
|---|---|---|
| Assessment rates (cukai tanah) | Yes | Annual local council rates |
| Quit rent | Yes | State land office charges |
| Fire insurance | Yes | Insurance for the rental property |
| Housing loan interest | Yes | Interest only, NOT principal repayment |
| Repairs and maintenance | Yes | Must be repairs, not improvements |
| Condo management fees | Yes | Monthly maintenance charges |
| Agent commission | Yes | Commission for securing tenant |
| Legal fees for tenancy agreement | Yes | Cost of preparing rental agreement |
| Advertising for tenants | Yes | Listing costs |
| Furniture depreciation | Yes | Capital allowance for furnished properties |
Not deductible: Loan principal repayment, initial renovation or improvements, personal use expenses, expenses during vacant periods with no tenant.
Example Calculation
Condo in KL, rented at RM2,500/month:
| Item | Annual (RM) |
|---|---|
| Gross rental income | 30,000 |
| Less: Loan interest | (12,000) |
| Less: Maintenance fees | (3,600) |
| Less: Assessment + quit rent | (900) |
| Less: Fire insurance | (300) |
| Less: Agent commission | (1,500) |
| Less: Repairs (plumbing, aircon) | (1,200) |
| Net rental income | 10,500 |
Repairs vs Improvements: The Critical Distinction
Repairs (Deductible)
- Fixing a leaking pipe
- Replacing a broken aircon compressor
- Repainting walls to original condition
- Fixing electrical faults
- Replacing a broken water heater with a similar unit
Improvements (Not Directly Deductible)
- Building an additional room
- Upgrading from basic to premium kitchen
- Installing a new feature that didn't exist before
- Renovating to increase property value
Improvements are capital expenditure. They may qualify for capital allowance (depreciation) spread over several years, but cannot be deducted as a lump sum.
Furnished Properties: Capital Allowance
| Item | Capital Allowance Rate |
|---|---|
| Furniture (beds, sofas, tables) | 10% per year |
| Electrical fittings (aircon, water heater) | 10% per year |
| Curtains, carpets | 10% per year |
| Kitchen appliances | 20% per year |
| Electronics | 20% per year |
Airbnb & Short-Term Rentals
Short-term rental income (Airbnb, homestay, Booking.com) is also taxable. The same principles apply — declare gross income and deduct allowable expenses.
Additional deductions for short-term rentals: platform service fees (Airbnb's host fee), cleaning costs between guests, linen and supplies.
Joint Ownership
If a property is jointly owned (e.g., husband and wife 50/50), the rental income is split according to the ownership share and each owner declares their portion.
Multiple Properties
Each property's income and expenses are calculated separately. Rental losses from one property can be offset against rental income from another property within the same year. However, rental losses cannot be offset against employment or business income.
Common Mistakes Landlords Make
1. Not declaring rental income at all — LHDN can cross-check with property records, tenancy stamps, and bank deposits.
2. Claiming full loan repayment — only interest is deductible, not principal.
3. Not claiming expenses — many landlords declare gross rent without deducting expenses, overpaying significantly.
4. Not keeping receipts — 7-year retention rule applies.
Rental income taxation can be complex with multiple properties. Consult a tax professional for personalised advice. Refer to hasil.gov.my for official rates.