Rental expenses landlords can deduct in Malaysia (2026): what LHDN allows and what it doesn’t

中文 · Bahasa Melayu · Bahasa Indonesia

By Jason Lim, REN 84424 · IQI Realty · Checked on 15 November 2026

Under LHDN Public Ruling No. 12/2018, a landlord letting a home in Malaysia can deduct the direct costs of earning the rent: assessment, quit rent, loan interest (not the principal), fire insurance, rent collection costs, tenancy renewal costs and ordinary repairs, plus replacement furniture in a furnished let. Costs of finding the first tenant and improvements are not deductible.

This guide is for owners letting a home in Johor Bahru or elsewhere in Malaysia. For tax rates and filing, see my guides for resident landlords and non-resident landlords.

General information, not tax, legal or financial advice. Your own position depends on your facts; confirm with LHDN or a licensed tax agent before you file.

Which rule decides what a landlord can deduct?

LHDN’s Public Ruling No. 12/2018, Income from Letting of Real Property, dated 19 December 2018, sets out how rent is taxed and which costs can be set against it. It replaced Public Ruling No. 4/2011.

The first question is whether your letting is a business. Most individual landlords are not: letting a home without providing services yourself is non-business letting under section 4(d) of the Income Tax Act 1967, and only direct letting expenses are allowed. Actively providing comprehensive maintenance or support services can make it a business under section 4(a), with wider deductions and capital allowances (paragraphs 5.1 and 5.2). Short stays with cleaning and guest services may fall here; see short-stay rental rules in JB and ask your tax agent.

What rental expenses can landlords deduct in Malaysia?

Paragraph 8.2 of the ruling gives these as examples of direct expenses that are deductible:

Expense	Deductible?	Practical notes
Assessment (cukai taksiran) and quit rent (cukai tanah)	Yes	Use the bills for the year the property was let. See quit rent and assessment.
Interest on the loan used to buy the property	Yes, interest only	The principal part of each instalment is not an expense. Your lender’s yearly statement shows the interest.
Fire insurance premium	Yes	Insurance on the building itself.
Rent collection fees and legal costs to enforce payment	Yes	Includes a manager’s collection fee and a lawyer’s letter of demand. See when a tenant stops paying.
Costs of renewing a tenancy or changing tenants	Yes	The usual home for an agent’s fee on a renewal or on a later tenant.
Ordinary repairs that keep the property in its existing state	Yes	Fixing what wore out or broke, like for like.
Replacing furniture and fittings in a furnished let	Yes (paragraph 12)	A worn-out air-conditioner, bed or fridge replaced.

Loan interest: the biggest item for most owners

In the early years of a loan, most of each instalment is interest, so this is often the largest deduction. The ruling allows interest on a loan used to buy the let property. If you topped up the loan and spent part elsewhere, ask your tax agent how to split the interest. See home loan top-ups, and use my home loan calculator to see how an instalment divides between interest and principal.

What expenses are not deductible from rental income?

Not deductible	Why	Where it comes from
Advertising, legal fees, stamp duty and agent’s commission for the first tenant	Initial expenses of starting to let	Paragraph 8.3; Example 18 refuses RM600 of advertising and RM1,800 of legal fees
Loan principal	Repaying capital, not a cost of earning rent	Only interest is listed in paragraph 8.2
Renovations, extensions, upgrades and first-time furnishing	Improvements, not ordinary repairs	Paragraph 8.2(f) covers only repairs that keep the property in its existing state
Costs before the home is first let	No rental source yet	Paragraph 8.5; expenses for the year are apportioned
Costs while the home is empty and not ready to let	Not incurred to produce rent	Paragraph 8.4.1

The first-tenant rule catches many new landlords: the agent’s fee for your first tenant is not deductible, but renewal and replacement-tenant costs are. See also stamp duty on tenancy agreements.

Repairs or improvements: how do you tell the difference?

The ruling does not define the two words; it allows only ordinary repairs that keep the property in its existing state. The practical question is whether you restored what was there or made the home better. Borderline cases are for your tax agent:

Spending	Usually treated as	Why
Repainting walls in a similar colour and quality	Repair	Restores the existing state
Fixing a leaking pipe, re-grouting or replacing broken tiles like for like	Repair	Puts back what was worn or damaged
Replacing a broken water heater or air-conditioner in a furnished let	Replacement of furnishings	Paragraph 12 allows it for non-business letting
Renovating the kitchen with new cabinets and a new layout	Improvement	Changes and upgrades the property
Buying furniture before the first tenant moves in	Not deductible	First-time furnishing is not a replacement

Keep invoices for improvements anyway. Spending that is not deductible against rent may still count towards the property’s cost when you sell, under the real property gains tax rules; see my RPGT guide and confirm with your tax agent. See also who pays for repairs and furnished vs unfurnished rentals.

Can landlords deduct maintenance fees and sinking fund?

This is the commonest grey area for condo owners. The ruling does not name maintenance charges or sinking fund contributions. Because paragraph 8.2 gives its list as examples, the test is still whether a cost was incurred wholly and exclusively to produce the rent.

• Maintenance charges pay for running the building you let. Ask your tax agent whether they treat them as a direct letting expense in your case.
• Sinking fund builds a reserve for future major works, which is closer to capital spending. Treatment is less clear; ask before you claim it.
• Utilities and internet you pay for the tenant under the agreement: also not named. Keep the bills and the agreement clause, and ask.

For what these charges cover, see maintenance fees and sinking fund.

What happens to expenses when the home is empty?

Situation	Expenses deductible?	Ruling
Before the home is let for the first time	No; apportion the year’s costs to the let months	Paragraph 8.5
Between tenants, kept in good condition and ready to let, for up to two years	Yes	Paragraphs 8.4.1 and 8.4.2(b); Example 21 allows the first 24 months of a 27-month gap
Empty for repair or renovation, a court order or official instruction, or reasons beyond your control	Yes, if kept ready to let	Paragraph 8.4.2(a), (c) and (d)
Empty and not ready to let, or used by you or your family	No	Paragraph 8.4.1

Keep evidence that the home was ready and on the market between tenancies, such as listing dates and viewing records. See my vacant home checklist for looking after an empty unit.

Illustration: apportioning before the first tenancy

Invented figures. Your first tenant moves in on 1 May at RM2,000 a month. Assessment, quit rent and fire insurance for the year total RM1,500. Only the eight let months count: RM1,500 x 8/12 = RM1,000 deductible against RM16,000 of rent.

How are several properties, losses and advance rent treated?

• Several homes form one source. All your non-business lettings in a year are grouped as one source (paragraph 7.1). A loss on one home can reduce the net rent from another. In Example 14, grouped rent of RM46,500 less expenses of RM23,800 gives statutory income of RM22,700.
• A net loss stays with the rent. If the group’s expenses exceed its rent, the result is nil. Examples 16 and 17 show the loss cannot be set against business or other income and cannot be carried forward.
• Advance rent is taxed when received. Rent received in advance is taxed in the period you receive it, and the related expenses are allowed in that period (paragraph 9.2).

Joint owners each declare their own share of the net rent and expenses, usually in line with their shares on the title; see joint names and tenancy in common.

Does this apply to non-resident and first-home owners too?

• Non-resident landlords use the same expense rules, then pay a flat 30% on net rent with no personal reliefs (LHDN). See rental income tax for non-resident landlords and the 182-day residence rule.
• First-home owners claiming the housing loan interest relief should know it does not cover a home that is let; the loan interest is then claimed against the rent instead. See housing loan interest tax relief.

The Budget 2027 property measures reported by Bernama on 12 October 2026 focused on first-home stamp duty and abandoned projects; I found no new deduction for landlords in them.

What records should a landlord keep, and for how long?

LHDN’s Navigasi HASiL 2026 guide tells individuals to keep records for seven years. Keep a folder per property with:

• Stamped tenancy agreements, renewal letters and the stamp duty certificates. See my landlord guide to tenancy agreements.
• A rent ledger with the date and amount of each payment; bank transfers make this simple (see rent collection methods).
• Assessment and quit rent bills and receipts, fire insurance schedules and the lender’s yearly interest statement.
• Repair and replacement invoices with before-and-after photos.
• Agent invoices showing whether a fee was for the first letting or a renewal.

For the full list of property papers to keep, see property documents to keep. Resident landlords without business income file Form BE, due 30 April; those with business income file Form B, due 30 June (Navigasi HASiL 2026, for YA2025).

Where to buy if this matters to you

Net rent depends on running costs as much as rent. These area guides cover the homes in each part of JB:

• JB Sentral and Bukit Chagar: near the CIQ and the RTS Link station.
• Mount Austin: an established family and tenant area.
• Iskandar Puteri: Medini, EduCity and the Second Link.
• Tebrau, Setia Indah and Molek: landed homes and condos near the malls.
• Skudai, Tampoi and Kempas: near universities and industrial areas; see also renting to students.

Compare them on my JB property map.

More Johor living guides: First-time landlord checklist · Tenant screening and inventory · Tenant damage beyond the deposit · E-invoicing for landlords

Frequently asked questions

What rental expenses can landlords deduct in Malaysia?

Under LHDN Public Ruling 12/2018, landlords letting on a non-business basis can deduct assessment, quit rent, interest on the loan used to buy the property, fire insurance, rent collection and enforcement costs, costs of renewing a tenancy or changing tenants, and ordinary repairs. Replacing furniture and fittings in a furnished let is also deductible.

Can a landlord deduct the agent’s fee for finding the first tenant?

No. LHDN Public Ruling 12/2018 treats advertising, legal fees, stamp duty and agent’s commission for the first tenant as initial expenses that are not deductible. Agent’s fees for renewing a tenancy or finding a replacement tenant are deductible.

Are renovation costs tax deductible for a rental property in Malaysia?

Renovations that improve or upgrade a rental property are generally not deductible, because LHDN only allows ordinary repairs that keep the property in its existing state. Like-for-like repairs, such as repainting or fixing leaks, are deductible. Keep renovation invoices, as they may matter for RPGT when you sell.

Can landlords deduct condo maintenance fees and sinking fund from rental income?

LHDN Public Ruling 12/2018 does not name condo maintenance charges or sinking fund contributions in its list of deductible rental expenses. The list is given as examples, so ask a licensed tax agent how to treat these charges for your own let unit before you claim them.

Are rental expenses deductible while the property is empty?

Rental expenses stay deductible during gaps of up to two years between tenants if the property is kept in good condition and ready to let, under paragraph 8.4.2 of LHDN Public Ruling 12/2018. Expenses before the first tenancy, or while the home is not ready to let, are not deductible.

Can a rental loss reduce tax on my salary in Malaysia?

No. For non-business letting, LHDN Public Ruling 12/2018 shows that a net rental loss cannot be set against salary, business or other income and cannot be carried forward. Losses on one let property can, however, reduce the net rent from your other non-business lettings in the same year.

Letting a home in JB?

Tell me the project and unit size. I will share the typical maintenance, quit rent and assessment levels I see in that building, and I can help you find and screen tenants. You can book an appointment or ask for a Zoom consultation.

Sources: LHDN, Public Ruling No. 12/2018, Income from Letting of Real Property, 19 December 2018, checked November 2026; Chartered Tax Institute of Malaysia, summary of Public Ruling No. 12/2018, 20 December 2019; LHDN, Navigasi HASiL 2026 (record keeping and YA2025 filing dates), 2026; LHDN, who is taxable (non-residents: flat 30%, no reliefs), checked November 2026; Bernama, “Budget 2027: Stamp Duty Exemption For First Home, Revival Of Abandoned Housing Projects”, 12 October 2026

Jason Lim, REN 84424, IQI Realty Sdn. Bhd. E (1) 1584/6. General information checked on 15 November 2026, not tax, legal or financial advice. Tax rulings, rates and deadlines change, and your residence status and other income matter; confirm with LHDN or a licensed tax agent before you file.