Kenya

Employment expenses

Bona fide reimbursement of business expenses relating to entertainment, travel, and car expenses are not part of taxable income. 

Actual airfare and moving expenses paid to expatriate employees recruited outside Kenya and there solely to perform their duties are not taxable. Leave passages for such employees are also not taxable. 

Reimbursed medical insurance or medical expenses are not normally taxable 

Any expense incurred wholly and exclusively in the production of employment income is not taxable. 

The Finance Act, 2023 amended Section 5(2) of the ITA to exempt from tax amounts reimbursed to an employee as mileage claim for travelling to perform official duties, provided that such reimbursement is based on the standard mileage rate approved by the Automobile Association of Kenya ('AA Kenya'). 

The Finance Act, 2023 exempted from taxation the income earned by a non-resident contractor, sub-contractor, consultant, or employee involved in the implementation of a project financed through a 100% grant under an agreement between the government and the development partner, to the extent provided for in the Agreement. This exemption applies on condition that the non-resident is in Kenya solely for the implementation of the project financed by the 100% grant. 

The Tax Laws (Amendment) Act, (TLAA) 2024 exempted from tax the reimbursement of expenditure incurred by public officers for purposes of performing official duties notwithstanding the ownership or control of any assets purchased. 

The Finance Act, 2025 amended section 5 of the Income Tax Act by increasing the tax-exempt per diem threshold from KSh 2,000 to KSh 10,000 per day. The exemption applies to amounts paid to an employee who is working out of station or outside their usual place of work while on official duty to cover subsistence, travel, entertainment or other out-of-pocket expenses. Following the amendment, the first KSh 10,000 per day is excluded from taxable employment income, while any amount above that threshold remains taxable unless supported by receipts. The change took effect on 1 July 2025 and better aligns the tax-free allowance with the actual costs employees incur during official travel. 

Personal deductions

Mortgage interest expenses

Section 15(3) of the ITA allows homeowners to deduct the interest they pay on their home mortgage from their taxable income. Effective December 2024, the TLAA increased the mortgage interest deduction from KES 300,000 per annum (or KES 25,000 per month) to KES 360,000 per annum (or KES 30,000 per month). 

The Finance Act, 2025 amended the ITA to expand the current mortgage interest deduction to funds applied to the construction (in addition to purchase or improvement) of premises for residential purposes. 

Social Health Insurance Fund ("SHIF") deduction 

The Tax Laws (Amendment) Act, (TLAA) 2024 amended section 15(2) of the Income Tax Act to allow contributions made to the Social Health Insurance Fund (SHIF) as deductible expenses for employees. Under the amendment, a new section 15(2)(ae) was introduced to provide for the deduction of contributions made in accordance with section 27(a) and (b) of the Social Health Insurance Act, 2023. The Act also amended section 31(1) of the Income Tax Act to remove the reference to contributions made to the National Hospital Insurance Fund (NHIF). 

Affordable Housing Levy ("AHL") deduction 

The Tax Laws (Amendment) Act, (TLAA) 2024 amended section 15(2) of the Income Tax Act to make Affordable Housing Levy contributions deductible for employees through the introduction of section 15(2)(ac). At the same time, the Act repealed section 30A, removing the previous affordable housing relief and replacing it with a deduction-based treatment. 

Contributions to a Kenya-registered retirement benefit scheme

An employee can claim a deduction against taxable income in respect of their annual contributions to a Kenya-registered retirement benefit scheme. This relief is limited to the lowest of the following:

• Actual contributions during the year.
• 30% of the employee’s pensionable (taxable) income during the year.
• KES 360,000 per annum (equivalent to a maximum monthly contribution of KES 30,000). This limit was increased from KES 240,000 per annum (or 20,000 per month) following implementation of the TLAA in December 2024.

Personal allowances

In Kenya, personal allowances take the form of personal relief tax credits (see the Other tax credits and incentives section for more information).

Special deduction

Under certain circumstances, expatriates may claim a one-third deduction from taxable income if they are employed by a regional office that carries on no business in Kenya and if they are absent from Kenya on business for at least 120 days in any tax year.