Tax Deductions & Reliefs in Nigeria 2026
Understanding tax deductions and reliefs can significantly reduce your taxable income and save you money. Under the Nigeria Tax Act 2025 (effective January 1, 2026), several deductions and reliefs are available. This comprehensive guide explains all of them.
Many Nigerians miss out on legitimate deductions simply because they don't know about them. This guide will help you claim everything you're entitled to and reduce your tax bill legally.
Tax-Free Threshold
₦800,000 Tax-Free Threshold
The first ₦800,000 of your annual income is completely tax-free. This is automatically applied - you don't need to claim it.
Example: If you earn ₦2,000,000 per year, only ₦1,200,000 is subject to tax.
Important: This threshold applies to all individuals, regardless of other deductions.
Individual Tax Deductions & Reliefs
1. Rent Relief (NEW in 2026 Tax Act)
Amount: 20% of your annual rent, capped at ₦500,000
Requirements:
- You must be paying rent (not a homeowner)
- Must have rent receipts or tenancy agreement
- Rent must be for residential accommodation
Example:
- Annual rent: ₦2,000,000 → Relief: ₦400,000 (20% of ₦2M)
- Annual rent: ₦3,000,000 → Relief: ₦500,000 (capped, not ₦600,000)
Documentation Needed: Rent receipts, tenancy agreement, or bank statements showing rent payments
2. Pension Contributions
Amount: Full amount of contributions to approved pension schemes (typically 8% of salary)
Requirements:
- Contributions must be to a Pension Fund Administrator (PFA) registered with PENCOM
- Both employee and employer contributions are deductible
- Must have contribution statements from your PFA
Example: If you earn ₦5,000,000 and contribute 8% (₦400,000), you can deduct the full ₦400,000.
Documentation Needed: Pension contribution statements, PFA statements
3. National Housing Fund (NHF) Contributions
Amount: Full amount of NHF contributions (typically 2.5% of salary)
Requirements:
- Must be contributing to NHF through your employer
- Contributions are mandatory for employees earning above ₦3,000 per month
Example: If you earn ₦5,000,000 and contribute 2.5% (₦125,000), you can deduct the full ₦125,000.
Documentation Needed: NHF contribution statements, payslips showing NHF deductions
4. National Health Insurance Scheme (NHIS) Contributions
Amount: Full amount of NHIS contributions
Requirements:
- Must be enrolled in NHIS
- Contributions can be through employer or individual enrollment
Documentation Needed: NHIS contribution receipts, enrollment certificate
5. Life Insurance Premiums
Amount: Premiums paid on life insurance policies
Requirements:
- Policy must be for yourself or your spouse
- Must be from a licensed insurance company in Nigeria
- Policy must be in force during the tax year
Documentation Needed: Insurance premium receipts, policy documents
6. Mortgage Interest (Owner-Occupiers)
Amount: Interest portion of mortgage payments (not principal)
Requirements:
- You must be the owner-occupier (living in the property)
- Mortgage must be from a licensed financial institution
- Only interest is deductible, not principal repayments
Example: If your monthly mortgage payment is ₦200,000 and ₦150,000 is interest, you can deduct ₦1,800,000 (₦150,000 × 12) annually.
Documentation Needed: Mortgage statements showing interest breakdown, loan agreement
7. Medical Expenses
Amount: Medical expenses for yourself, spouse, and children
Requirements:
- Expenses must be from licensed medical facilities
- Must be for treatment, not cosmetic procedures
- Subject to reasonable limits
Documentation Needed: Medical bills, receipts from hospitals/clinics
8. Charitable Donations
Amount: Donations to approved charitable organizations
Requirements:
- Organization must be approved by FIRS
- Subject to limits (typically 10% of assessable income)
- Must have receipts from the organization
Documentation Needed: Donation receipts, organization's approval certificate
Business Tax Deductions
1. Operating Expenses
All legitimate business expenses are deductible:
- Salaries and wages
- Rent for business premises
- Utilities (electricity, water, internet)
- Office supplies
- Professional fees (legal, accounting)
- Insurance premiums
- Repairs and maintenance
- Marketing and advertising
2. Capital Allowances (Depreciation)
Different from accounting depreciation. Rates include:
- Motor vehicles: 25% per annum
- Plant and machinery: 20% per annum
- Furniture and fittings: 10% per annum
- Buildings: 10% per annum
- Computers and software: 20% per annum
Important: Capital allowances are calculated on the cost of assets, not their current value.
3. Interest on Business Loans
Interest paid on loans used for business purposes is fully deductible. Keep loan agreements and interest payment records.
4. Training and Development
Costs of training employees to improve business operations are deductible.
5. Research and Development
Expenses on R&D activities are deductible, encouraging innovation.
What Cannot Be Deducted
Non-Deductible Expenses
- ❌ Personal expenses (clothing, personal travel, etc.)
- ❌ Fines and penalties
- ❌ Capital expenditures (but capital allowances apply)
- ❌ Dividends paid to shareholders
- ❌ Entertainment expenses (limited deduction allowed)
- ❌ Expenses not related to income generation
- ❌ Expenses without proper documentation
How to Claim Deductions
- Keep Records: Maintain receipts and documents throughout the year
- Organize Documents: Sort by deduction type for easy filing
- Calculate Totals: Sum up all deductions before filing
- Enter on Return: Include all deductions when filing your tax return
- Upload Documents: Attach supporting documents when filing online
- Keep Copies: Retain copies for at least 6 years (FIRS can audit)
Maximizing Your Deductions
- ✅ Keep all receipts and documents organized
- ✅ Claim rent relief if you're renting (20% of rent, max ₦500,000)
- ✅ Ensure pension and NHF contributions are properly documented
- ✅ Consider life insurance if you don't have it (premiums are deductible)
- ✅ Keep medical expense receipts
- ✅ For businesses, maintain detailed expense records
- ✅ Use our tax calculator to see how deductions affect your tax
Common Mistakes to Avoid
- ❌ Not claiming rent relief (many people miss this!)
- ❌ Forgetting to include pension and NHF contributions
- ❌ Not keeping receipts and documentation
- ❌ Claiming personal expenses as business expenses
- ❌ Not understanding the difference between capital allowances and depreciation
- ❌ Missing deadlines to claim deductions
Example: Calculating Tax with Deductions
Annual Income: ₦5,000,000
Deductions:
- Tax-free threshold: ₦800,000
- Rent relief (20% of ₦2M rent): ₦400,000
- Pension (8%): ₦400,000
- NHF (2.5%): ₦125,000
- NHIS: ₦50,000
Total Deductions: ₦1,775,000
Taxable Income: ₦5,000,000 - ₦1,775,000 = ₦3,225,000
Tax Due: Calculated on ₦3,225,000 instead of ₦5,000,000
Savings: Significant reduction in tax liability!
Use our tax calculator to see how deductions reduce your tax liability.
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