Is Rental Income Taxable in Malaysia?
Yes — rent you receive is taxable income. The good news is a long list of expenses you can deduct, including the one most owners miss. Here is how it works for 2026.
Many landlords assume rent is tax-free pocket money, or they over-declare because they do not know what they can subtract. Both cost you. Here is the clean picture.
Yes, rental income is taxable
Rent received from letting out property is taxable under Section 4(d) of the Income Tax Act 1967. You declare it in your annual return, but you are taxed on the net figure — gross rent minus the expenses the law allows. Get the deductions right and the taxable amount is often much smaller than the rent itself.
What you can deduct
Allowable expenses incurred in earning the rent include:
- Assessment tax and quit rent on the property.
- Fire insurance premiums.
- Repairs and maintenance to keep the property in a lettable state.
- Agent fees for renewing or finding a replacement tenancy.
- Loan interest — the interest portion of your mortgage repayment.
The loan interest point most owners miss
This is the big one. The interest you pay on the loan for a rented-out property is deductible against the rental income. That is very different from an own-stay home, where your mortgage interest gives you no deduction at all. So the same loan can be a tax shield on an investment unit and nothing on the home you live in — worth remembering when you decide which property to finance.
What you cannot deduct
Not everything counts. In particular, initial expenses to get your very first tenant — such as the cost of the first advertising or agent commission to secure the first letting — are generally not deductible, because they are treated as incurred to create the source of income rather than to maintain it. The capital repayment part of your loan instalment is also not deductible — only the interest is.
Weighing an investment unit and want the after-tax picture?
Tell me the rent and the loan and I will walk you through which costs are deductible so you can see the real net yield. I am Louis Koh, over a decade in Johor Bahru property.
Frequently asked questions
Is rental income taxable in Malaysia?
Yes, under Section 4(d) of the Income Tax Act. You are taxed on the net — rent less allowable expenses such as assessment tax, quit rent, insurance, repairs, renewal agent fees and loan interest.
Can I deduct my mortgage from rental income?
You can deduct the loan interest against rental income, but not the capital repayment. Note interest is deductible for a rented property but not for an own-stay home.
Are the costs of finding my first tenant deductible?
Generally no. Initial expenses incurred to secure the first tenant are not deductible, unlike the ongoing costs of maintaining the letting.
Want to see actual projects?
From Johor Bahru to Kuala Lumpur, I keep a documented list of what is selling now — including projects open to foreign buyers.