What can Malaysian landlords deduct from rental income?
For ordinary residential letting under Section 4(d), LHDN allows six expense categories: assessment and quit rent; loan interest on the property; fire insurance; rent-collection or enforcement costs; renewal and subsequent-tenant costs; and ordinary repairs. All must be wholly and exclusively incurred in producing the rental income.
The classification matters before you build the deduction list. Passive long-term residential letting is normally a Section 4(d) source; only landlords who provide comprehensive active maintenance and support services are classified under Section 4(a) as a business source. If you rent out a condo on a standard 12-month tenancy with no hotel-style services, you are almost certainly Section 4(d). Ask your tax agent if you are unsure — the classification determines which deductions are available and whether losses can be offset.
The sourced categories come from LHDN Public Ruling No. 12/2018. Every item below must be "wholly and exclusively" incurred in producing the rental income. That phrase does the heavy lifting: a cost connected to improving your property value, preparing it for the very first tenant, or serving personal use does not pass the test.
The six deductible categories — and where landlords go wrong
Each category has a documentary requirement. The deduction is only as strong as the evidence you keep. The most common failure is mixing repair invoices with improvement invoices and losing the distinction by tax season.
| Expense category | What to keep | Common mistake |
|---|---|---|
| Assessment and quit rent | Council or land office bill + payment receipt | Filing the wrong year's bill; mixing multiple properties |
| Loan interest on the property | Bank interest schedule (not the full instalment) | Claiming the principal repayment as well as interest |
| Fire insurance premium | Policy schedule + receipt | Claiming household or contents insurance instead of fire |
| Rent-collection or enforcement cost | Invoice, recovery correspondence | No direct link to a specific letting or enforcement action |
| Renewal / subsequent-tenant cost | Agent invoice + renewal agreement or second tenancy trail | Treating first-tenant agent commission as deductible |
| Ordinary repairs | Contractor invoice + before/after photos + repair messages | Claiming renovation, upgrade, or betterment as a repair |
The first-tenant trap. This is the detail most competitor guides skip. LHDN Public Ruling 12/2018 treats costs of securing the very first tenant as "initial expenses" — they create the source of rental income rather than produce income from an existing source, so they are not deductible. The named initial expenses are: first-letting advertising, legal cost to draft the first tenancy agreement, stamp duty on the first tenancy, and agent commission for the first letting.
From the second tenant onwards, renewal and re-letting costs (including agent commission) are treated as ongoing costs of producing income and are deductible.
For the capital-vs-repair distinction — which affects whether a spend is a repair (deductible in year) or a capital improvement (not deductible under Section 4(d)) — see the repair versus capital allowance guide.
One year's deductible expenses: what the working paper looks like
Start with gross rent received, subtract only the six supported expense categories with documentary proof, and file the working paper with your tax agent. The calculation is only as strong as the evidence behind each line.
The table below is a record template, not a computation for your specific unit. Your final position depends on your facts, ownership share, residency status and current LHDN guidance from a qualified tax agent.
| Line item | Example record | Amount |
|---|---|---|
| Gross rent received | Monthly ledger × 12 + bank proof | RM X |
| Less: assessment and quit rent | Council demand + receipt | (RM Y) |
| Less: loan interest | Bank interest schedule (not principal) | (RM Y) |
| Less: fire insurance | Policy + receipt | (RM Y) |
| Less: subsequent-tenant agent commission | Invoice + second tenancy trail | (RM Y) |
| Less: ordinary repairs | Contractor invoices + photos | (RM Y) |
| Net rental income | File with your tax agent | RM Z |
There is no special landlord income-tax relief. Allowable rental expenses reduce gross rent to net rental income, and then ordinary personal reliefs apply to your total income in the normal way — they are separate tracks. Do not confuse the two.
CP500 instalment payments in 2026. If LHDN has issued a CP500 notice, rental income falls under the scheme and you pay the estimate in six instalments from March. For Year of Assessment 2026, LHDN granted a transition: no penalty for non-payment or under-estimation of CP500 instalments by individuals earning rental, interest and royalties alongside employment income. The tax itself is still owed — only the penalty is waived for YA2026. You can revise the estimate with Form CP502 by 30 June (first revision) or 31 October (second revision). See the full landlord rental tax guide for the filing context.
e-Invoice. Individual landlords with annual income below RM500,000 are not yet required to issue e-Invoices for personal rental income. Those between RM500,000 and RM1 million are brought into the LHDN MyInvois system from 1 July 2026. Where the tenant is a registered business, the tenant issues a self-billed e-Invoice for the rent it pays — you do not issue it. Check the current LHDN guideline for your specific phase date before acting.
SPEEDHOME's records layer
SPEEDHOME's landlord workflow produces the documents that map directly onto LHDN's deductible categories: a tenancy agreement trail, a rent collection ledger, repair message threads and contractor invoices, and the agent commission trail for renewals.
The rental expenses that LHDN asks about map closely onto what SPEEDHOME's workflow produces: a tenancy agreement trail (for the subsequent-tenant vs first-tenant distinction), a rent collection ledger (for gross income), repair message threads and contractor invoices (for ordinary-repair evidence), and the agent commission trail for renewals.
That does not replace a tax agent. It means the dangerous part of tax season — reconstructing twelve months of activity from memory — is less dangerous when the operational records were built correctly from move-in. Browse available rentals or see how the SPEEDHOME landlord service structures the records.
FAQ
Can I deduct mortgage repayments?
No. The deductible item is loan interest on the property, not the principal repayment. Ask your bank for an interest schedule that separates the two. Claiming the full instalment as a deduction overstates the deduction.
Is first-tenant agent commission deductible?
No. LHDN Public Ruling 12/2018 names first-tenant agent commission as an initial expense, not a recurring deductible cost. Commission for the second tenant onwards, on a renewal or re-let, is treated as a cost of producing ongoing rental income and is deductible.
Can I deduct a full renovation before the next tenant?
Not as an ordinary repair. Renovation, upgrade, or betterment that improves the property beyond its existing state is a capital spend, not an ordinary repair. Section 4(d) landlords cannot claim capital allowances the way a business can. See the repair vs capital allowance guide.
What proof does LHDN actually need?
Keep the evidence chain for every line: tenancy agreement, rent ledger and bank proof (income), then for each deduction a bill or policy, an invoice, and payment proof. For repairs, add contractor notes and dated before/after photos. A clean folder per property per year is far easier to defend than a shoebox of mixed receipts.
Does the CP500 penalty waiver for 2026 mean I don't owe the tax?
No. The YA2026 waiver removes the penalty for under-estimating or not paying instalments — it does not waive the underlying rental income tax. You still file and pay the final tax due on your net rental income.