Illinois Regulation

Welcome to Illinois, a state where the charm of the Midwest meets the bustling energy of urban life, making it a prime destination for those looking to delve into the world of short-term rentals. From the iconic skyline of Chicago to the serene landscapes of rural towns, Illinois offers a diverse array of short-term rental opportunities for hosts and travelers alike. This introduction will guide you through the vibrant and ever-evolving landscape of vacation rentals in Illinois, highlighting the unique blend of cultural richness, historical significance, and modern amenities that make the state an attractive market for short-term rental investments. Whether you're a seasoned host or new to the game, Illinois presents a fascinating backdrop for your short-term rental journey.

Is there a statewide definition of STR?

In Illinois, a short-term rental is legally defined as any rental of a residential dwelling unit for a period of 31 days or less. This encompasses various types of accommodations, including entire houses, apartments, condos, cabins, and other living spaces offered for short stays. The 31-day threshold is what separates short-term rentals from longer-term leases, which are subject to different regulations.

Statewide Registration Requirement

In Illinois, the statewide registration and licensing requirements for short-term rentals vary based on the type of rental and location. While state law provides a general framework for regulating short-term rentals, local municipalities have the authority to enact additional ordinances.

Statewide, hosts renting out two or more units in a building with four or more units must obtain a license from the Department of Public Health, mainly applicable to condos and apartment buildings. Home-sharing hosts who rent space in their primary residence for up to 30 consecutive days are exempt from licensing but must still register with the state. The registration process involves providing contact, property, and emergency information, paying annual fees, and ensuring the rental units meet safety codes. It's important to note that the licensing process includes a formal application, fee, inspection, and renewal. Non-compliance can lead to fines.

Furthermore, in cities like Chicago, different requirements apply. For example, vacation rentals must obtain a license from the city, and shared housing units need approval for registration. Chicago imposes various taxes on short-term rentals, including a Hotel Accommodations Tax, a Shared Housing Surcharge, and a Domestic Violence Surcharge.

Statewide Tax Requirement

In Illinois, short-term rentals are subject to various state and local taxes. At the state level, hosts are required to collect and remit the following taxes:

Hotel Operators Occupation Tax: This tax is imposed at a rate of 6.5% and applies to rentals of 30 days or less.
Sales Tax: Short-term rentals are also subject to Illinois' state sales tax, which is 6.25% in most areas. Some cities may impose additional local sales taxes.
State Income Tax: Income earned from short-term rentals is subject to Illinois' individual and corporate income tax.

Additionally, local municipalities in Illinois may levy their own lodging taxes on short-term rental transactions. These can include municipal hotel taxes, local sales taxes, and tourism taxes, which can range from 1-6%. The exact tax rates and types depend on the location of the rental property.

Hosts are responsible for registering with the Illinois Department of Revenue to receive a certificate of registration and taxpayer ID. They must also register with local tax authorities if required. Once registered, hosts must collect the appropriate taxes from guests and remit them to the state and any relevant local authorities. Tax returns are generally filed on a monthly basis, and all tax revenue collected from guests must be reported and paid.