How Rental Income is Taxed in Nigeria

Rental Income is Taxable

If you earn income from renting out property in Nigeria, that income is subject to Personal Income Tax. There's no separate "rental tax" - it's part of your total taxable income.

How It Works

Step 1: Calculate Gross Rental Income

Total annual rent received from tenants.

Step 2: Deduct Allowable Expenses

You can deduct:

• **Property maintenance**: Repairs, painting, plumbing
• **Insurance**: Building and landlord insurance
• **Property management fees**: Agent commissions
• **Legal fees**: Lease preparation, tenant issues
• **Utilities**: If you pay and include in rent
• **Ground rent and service charge**: If applicable

What You Cannot Deduct

• Mortgage principal payments
• Personal use portions
• Capital improvements (but see depreciation below)
• Costs of acquiring the property

Step 3: Calculate Taxable Rental Income

Gross rent minus allowable deductions.

Step 4: Add to Other Income

Rental income is added to your other income (salary, business, etc.) and taxed at standard PIT rates.

Depreciation

You can claim capital allowances on the building and furnishings:

• Building: 10% per annum (straight-line)
• Furniture and fittings: 20% per annum

This reduces your taxable income over time.

Example Calculation

Rental Property

• Annual rent: ₦3,000,000
• Maintenance: ₦200,000
• Insurance: ₦50,000
• Agent fees: ₦300,000
• Depreciation: ₦400,000

Taxable rental income: ₦2,050,000

If you also earn ₦5,000,000 salary:

• Total income: ₦7,050,000
• Apply CRA and calculate tax

Withholding Tax on Rent

When a company pays rent, they must deduct 10% WHT. This is a prepayment of your tax, not additional tax.

Example: Company pays ₦3M rent → They remit ₦300,000 to FIRS, you receive ₦2.7M

You get a credit note for ₦300,000 to offset against your annual tax.

Filing Requirements

1. Include rental income in your annual tax return

2. Attach schedule showing rental income calculation

3. Keep records of all expenses and receipts

4. File with your State Internal Revenue Service

Multiple Properties

If you have several rental properties, you can:

• Pool income and expenses
• Offset losses on one property against profits on another
• Consider setting up a property company (different tax treatment)

Common Issues

Underreporting Rent

Tax authorities can estimate fair market rent if they believe you're underreporting. Keep lease agreements on file.

Cash Payments

Even if tenants pay cash, the income is taxable. Not reporting it is tax evasion.

Vacant Periods

You can't claim expenses during periods when you're not actively trying to rent the property.

Conclusion

Rental income tax in Nigeria is straightforward if you keep good records and understand the allowable deductions. Many landlords overpay because they don't claim all their deductions.

Use our Rental Income Calculator to estimate your tax.