Living in the United States while maintaining investments, income streams, or family ties in Kenya places you in a unique—and often confusing—tax position. Many Kenyans abroad assume that distance shields them from the Kenya Revenue Authority (KRA), while others believe the Internal Revenue Service (IRS) has no interest in income earned back home.
As of 2026, both assumptions are risky.
Global tax transparency has increased, enforcement systems have matured, and both KRA and the IRS now rely heavily on data matching. To avoid penalties, audits, or frozen accounts, you must understand how Kenyan and US tax rules interact.
This guide explains what Kenyans living in the US need to know about tax residency, rental income, capital gains, digital income, and asset reporting—clearly and practically.
This guide is for informational purposes only and does not constitute tax or legal advice.
Do Kenyans Living in the US Pay Tax in Kenya?
The short answer is: it depends.
Kenya taxes individuals based on tax residency and income source, not citizenship. If you qualify as a Kenyan tax resident, KRA may tax you on worldwide income, including earnings from the US. If you are a non-resident, Kenya only taxes income accrued in or derived from Kenya.
Understanding this distinction is critical.
You read about Managing Money, Business & Investments in Kenya While Living in the USA here.
How Kenya Determines Tax Residency
Many diaspora Kenyans make costly mistakes by assuming residency is tied to citizenship. Under Kenyan tax law, residency is determined using three tests.
The Permanent Home Test
You are considered a Kenyan tax resident if you maintain a permanent home in Kenya and are present in the country for any period, even a single day, during the year.
A permanent home includes:
- A house you own
- A long-term rental
- A furnished residence kept available for your use
If you keep a home in Syokimau or Ruiru for visits and stay there briefly in December, KRA may treat you as a tax resident for the entire year.
The 183-Day Test
You qualify as a resident if you are physically present in Kenya for 183 days or more in a calendar year.
The 122-Day Rolling Test
You are resident if you average 122 days per year in Kenya over the current year and the two preceding years.
Why Residency Matters
- Residents are taxed on worldwide income
- Non-residents are taxed only on Kenyan-source income
This single classification determines whether your US salary, consulting income, or business earnings fall within KRA’s scope.
Rental Income Tax for Kenyans Living in the US
Real estate is the most common investment among Kenyans abroad—and also the most frequently misfiled.
The 7.5% Monthly Rental Income Tax Explained
Kenya offers a Monthly Residential Rental Income (MRI) tax at 7.5% of gross rent, payable monthly. This rate was reduced from 10% effective January 1, 2024.
However, this regime is strictly for Kenyan tax residents.
Why Non-Residents Cannot Use the 7.5% Rate
If you live in the US and qualify as a non-resident, you are not legally eligible for the 7.5% MRI rate—even if iTax allows you to select it.
Non-residents must file under the Annual Rental Income (ARI) regime.
Annual Rental Income (ARI) for Diaspora Kenyans
Under ARI:
- Tax is charged on net rental income
- Allowable deductions include repairs, insurance, management fees, and mortgage interest
- Rates range from 10% to 35%
Example risk:
If you earn KSh 6 million annually:
- MRI (7.5%) = KSh 450,000
- ARI assessment after audit = KSh 1.7M+
The difference, plus penalties and interest, can wipe out years of returns.
You can consult professional accounting support for rental income in Kenya
Capital Gains Tax When Selling Property in Kenya
When you sell property in Kenya, you are subject to Capital Gains Tax (CGT) at 15% on the net gain—regardless of where you live.
Formula:
CGT = 15% × (Transfer Value − Adjusted Cost)
Adjusted cost includes:
- Purchase price
- Legal fees
- Stamp duty
- Capital improvements
CGT must be paid within 30 days of sale or at title transfer. Late payment attracts:
- 20% penalty
- 1% monthly interest
Remote Work, Digital Income & SEPT Tax
If you earn income digitally from Kenyan users, location does not protect you.
The Finance Act 2025 introduced the Significant Economic Presence Tax (SEPT), replacing the Digital Service Tax.
What SEPT Covers
- Online consulting
- Digital content (YouTube, blogs)
- Online courses
- SaaS and subscription services
SEPT applies a 3% tax on gross turnover, and as of 2025, the KSh 5 million threshold was removed. Liability begins from the first shilling earned from Kenyan users.
US Tax Rules for Kenyan Income
The US taxes based on citizenship and residency, not source.
Reporting Kenyan Income to the IRS
You must report:
- Kenyan rental income
- Dividends and interest
- Business and consulting income
All figures must be converted to USD and reported on Form 1040. Self-employed income may also attract US self-employment taxes.
How the Foreign Tax Credit Works Without a Treaty
Kenya and the US do not have a tax treaty. However, you can claim relief using the Foreign Tax Credit (Form 1116).
If you pay tax in Kenya, you may offset that amount against your US tax liability on the same income, subject to IRS limits.
FBAR and FATCA Reporting for Kenyan Assets
Paying the correct tax is important—but asset reporting failures carry harsher penalties.
FBAR (FinCEN Form 114)
Required if the combined value of all foreign accounts exceeds $10,000 at any point during the year.
This includes:
- Kenyan bank accounts
- SACCOs
- M-Pesa balances
FATCA (Form 8938)
Required if:
- Assets exceed $50,000 on December 31, or
- $75,000 at any point during the year (single filers)
Penalties can exceed $50,000 per year.
How KRA Is Enforcing Diaspora Taxes in 2026
KRA enforcement has intensified significantly.
Key Developments
- eRITS integration with Ardhisasa and utility data
- Agency notices compelling tenants or banks to remit unpaid tax
- Mandatory NIL returns for all active PIN holders
- eTIMS validation of income and expenses from January 2026
Ignoring compliance is no longer a viable strategy.
Action Checklist for Kenyans Living in the US (2026)
- Audit your residency status annually
- File rental income under the correct regime
- Update or dormancy-apply for unused PINs
- Use Form 1116 for Foreign Tax Credits
- Declare foreign assets (FBAR & FATCA)
Yes. If you own property, earn income, or transact in Kenya, a PIN is required.
Yes—but Foreign Tax Credits can reduce double taxation.
Yes. Kenyan-source income remains taxable regardless of residency.
Final Thought
The financial bridge between Kenya and the US can build wealth—or destroy it—depending on compliance. The cost of filing correctly is minimal. The cost of ignoring your obligations can be devastating.
