Illinois Short-Term Rental Tax Overview
Illinois imposes state income tax at rates up to 4.95% on net rental income, combined with Hotel Operators' Occupation Tax at 6-17%+ on gross rental receipts. 6% state hotel tax + local taxes varying widely. The total tax burden for Airbnb hosts in Illinois varies by location, ranging from approximately 17.4%+ in Chicago to 12% in Galena. Understanding the layered structure of federal, state, and local taxes is essential for compliance and accurate pricing.
This guide covers the 2026 tax year. Tax rates and rules change frequently — always verify current rates with the Illinois Department of Revenue and consult a qualified tax professional for advice specific to your situation. Federal tax obligations (Schedule E, Form 1099-K, the 14-day rule) apply in addition to all state and local taxes described below. See IRS Publication 527 for federal rental income rules.
Income Tax on Rental Income
Rate: 4.95%
Flat 4.95% rate
- Net STR income (after expenses) reported on the Illinois state income tax return
- Federal Schedule E (or Schedule C if substantial services provided) is required regardless of state tax
- The 14-day rule: if you rent your primary residence 14 days or fewer per year, federal rental income is tax-free (IRS Publication 527)
- Self-employment tax may apply if you provide hotel-like services (daily cleaning, meals, concierge)
Hotel Operators' Occupation Tax
Rate: 6-17%+
6% state hotel tax + local taxes varying widely
What Airbnb Collects Automatically
- State hotel operators' occupation tax (6%)
What Hosts Must Collect and Remit
- Chicago taxes (multiple layers)
- Other city/county taxes
Local Tax Rates by City in Illinois
Combined estimated occupancy/lodging tax rates including state + local components (income tax not included):
| City / Area | Local Tax Rate | Combined Rate | Registration Required? |
|---|---|---|---|
| Chicago | 4.5% city + 7.14% MPEA + others | 17.4%+ | Yes - STR registration |
| Springfield | 7% city | 13% | Yes |
| Naperville | 5.5% city | 11.5% | Yes |
| Champaign | 7% city | 13% | Yes |
| Galena | 6% city | 12% | Yes |
Deductions for Illinois Airbnb Hosts
Illinois generally conforms to federal tax rules for rental income deductions under IRC Section 162 and Section 167. Standard deductible expenses include: depreciation of the rental property over 27.5 years using MACRS (IRS Publication 946), mortgage interest proportional to rental use, property taxes, insurance premiums, cleaning and maintenance costs, guest supplies, utilities, Airbnb service fees, professional photography, and travel to the property for maintenance. Check the Illinois Department of Revenue website for any state-specific adjustments to federal depreciation rules, as some states do not conform to bonus depreciation. At the 4.95% top rate, maximizing legitimate deductions is important for reducing your Illinois state tax liability.
Common Deductible Expenses
- Depreciation — Building cost over 27.5 years (IRS Publication 946); often the largest single deduction
- Mortgage interest — Deductible in proportion to rental use percentage
- Property taxes — Proportional to rental use days vs. personal use days
- Insurance — STR-specific or landlord insurance premiums
- Cleaning and maintenance — All turnover cleaning fees, repairs, and upkeep
- Supplies — Linens, toiletries, coffee, kitchen supplies for guests
- Platform fees — Airbnb host service fees (typically 3%) are fully deductible
- Utilities — Electricity, internet, water, gas proportional to rental use
- Professional fees — CPA, tax preparer, attorney fees related to the rental business
Filing Requirements and Deadlines
Registration
Required: Tax Registration / Business License
Cost: Varies by jurisdiction
Register at: Illinois Department of Revenue
Filing Schedule
Monthly or quarterly for lodging/sales tax; annually for income tax
Key Resources
Common Illinois Tax Mistakes for Airbnb Hosts
Mistake #1
Not separating state-level and local-level tax obligations — Illinois imposes state hotel operators' occupation tax but cities/counties often have additional taxes that require separate registration and filing.
Mistake #2
Forgetting to register for tax collection even when Airbnb collects some taxes — most states require hosts to have their own tax registration regardless of whether Airbnb collects on their behalf.
Mistake #3
Not claiming all eligible deductions on the Illinois state return — rental expenses including depreciation, mortgage interest (proportional), cleaning, and supplies can significantly reduce your 4.95% state tax liability.
Illinois Short-Term Rental Regulations Beyond Tax
Illinois does not have comprehensive statewide short-term rental legislation. Regulations are primarily set at the city and county level, with tourist-heavy areas generally having more specific STR ordinances. Hosts should check with their local municipality for zoning compliance, business licensing requirements, safety inspection mandates, and any occupancy or night-cap limits. Some Illinois cities have begun requiring STR-specific permits and registration in response to housing affordability concerns. Always verify current local requirements before listing.
Calculate Your Illinois Airbnb Tax
Enter your income, expenses, and select Illinois to get an instant federal + state estimate.
Frequently Asked Questions
Does Illinois tax Airbnb income?
Illinois imposes state income tax at rates up to 4.95% on net rental income. Additionally, Illinois imposes Hotel Operators' Occupation Tax at a combined rate of approximately 6-17%+. Local taxes may add more depending on your city or county. All net rental income must also be reported on your federal tax return (Schedule E). See the Illinois Department of Revenue and IRS Publication 527 for details.
Does Airbnb collect Illinois taxes?
Airbnb collects State hotel operators' occupation tax (6%) in Illinois. However, chicago taxes (multiple layers) and other city/county taxes may still be the host's responsibility. Always verify your specific jurisdiction on Airbnb's "Occupancy Tax Collection" page and with the Illinois Department of Revenue.
Do I need a permit to Airbnb in Illinois?
Requirements vary by locality. At minimum, you typically need to register with the Illinois Department of Revenue for tax collection purposes. Many cities and counties require additional business licenses, STR permits, or zoning approvals. Tourist-heavy areas tend to have stricter requirements. Check with your local municipality before listing.
What can Illinois Airbnb hosts deduct?
Illinois follows federal rules for most rental deductions. Standard deductible expenses include: depreciation (27.5 years MACRS), mortgage interest (proportional to rental use), property taxes, insurance, cleaning, supplies, utilities, Airbnb fees, and professional services. See IRS Publication 527 for the complete list.
When are Illinois tax returns due?
State income tax returns are typically due April 15. Hotel Operators' Occupation Tax returns are usually due monthly or quarterly depending on your tax liability. File through the Illinois Department of Revenue online portal at https://tax.illinois.gov/. Federal income tax returns (including Schedule E for rental income) are due April 15 annually.