Illinois Short Term Rental Laws: AirBnB & Vacation Rental Regulations

In Illinois, the burgeoning Airbnb market is governed by a mix of state and local regulations. This article offers insights into Illinois' definition of short-term rentals, the nuances of city-specific rules, and the critical requirements for starting and operating an Airbnb, providing a comprehensive guide for potential hosts and investors.

Illinois’s Definition of a Short Term Rental

Illinois legally defines a short-term rental 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 intended for short stays. The 31-day cutoff is a key aspect that differentiates short-term rentals from longer-term leases, which follow different regulations.

Short-term rentals in Illinois, such as those offered through Airbnb, Vrbo, and similar platforms, have gained significant popularity, prompting increased regulation at both state and local levels. In Illinois, the definition includes:

• Entire Home Rentals: Renting out an entire residential unit without the owner present.
• Private or Shared Room Rentals: Renting out a room within the owner’s primary residence.
• Accessory Dwelling Unit (ADU) Rentals: Guest houses, mother-in-law suites, and similar structures rented out for short-term accommodation.
• Vacation Rental Homes: Larger properties, often in resort areas, rented for short-term vacation stays.

There are several exceptions and specific requirements under Illinois law:

• Statewide Framework: A baseline set of regulations is provided by state law.
• Local Ordinances: Counties and municipalities may have additional, potentially more restrictive, rules.
• Licensing Requirements: Hosts renting out multiple units in certain buildings must obtain a license, while those renting space in their primary residence for up to 30 consecutive days are exempt from licensing but must register with the state.
• Permit Requirements: Many municipalities require short-term rental permits with specific safety and information provisions.

Starting a Short Term Rental Business in Illinois

To start a new short-term rental business, follow these steps:

1. Registration and Licensing: Hosts renting out two or more units in a building with four or more units need a license from the Department of Public Health, mainly applicable to condos and apartment buildings. Home-sharing hosts renting space in their primary residence for up to 30 consecutive days are exempt from licensing but must register with the state. The licensing process involves a formal application, fee, inspection, and renewal process​​.
2. Local Permitting and Approvals: Many Illinois municipalities require hosts to obtain local short-term rental permits. Requirements include providing contact and property information, paying annual permit fees, attesting to safety code compliance, and limiting guest numbers​​.
3. Best Practices for Starting: Research all applicable laws and secure required state and local licenses/permits early. Consult with professionals for legal, tax, and insurance implications. Develop rental contracts and house rules. Obtain proper insurance coverage and consider installing smart home technology. Address neighbor concerns and complaints promptly​​.

There are several required inspections for short-term rentals in Illinois:

• State licensing inspections by the Department of Public Health.
• Safety inspections for local short-term rental permits.
• Periodic fire safety inspections under local laws.
• Inspections after major renovations to ensure compliance​​.

Required paperwork includes:

• Registration and licensing applications.
• Local permit applications.
• Rental contracts and house rules.
• Insurance documents.
• Tax documentation​​.

Short Term Rental Licensing Requirement in Illinois

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. Licensing involves a formal application, fee, inspection, and renewal process. Non-compliance can result in fines.

Local municipalities may require hosts to obtain local short-term rental permits, including providing contact and property information, paying annual permit fees, attesting that rental units meet safety codes, and limiting the number of guests allowed.

Occupancy limits are imposed by both state law and local ordinances, with specific caps on the number of overnight and daytime guests.

Illinois Short Term Rental Taxes

Understanding the tax implications for short-term rental operators in Illinois is crucial for ensuring compliance and optimizing financial outcomes. This guide will explore the taxes specifically charged to short-term rental operators in Illinois, their interaction with state and federal taxes, comparisons with other major states, and potential deductions.

In Illinois, short-term rental operators are subject to various lodging taxes, which may include:

• Illinois Hotel Operators’ Occupation Tax
• Illinois Sports Facilities Hotel Tax (Chicago)
• Metropolitan Pier and Exposition Authority Hotel Tax (Chicago)
• Municipal Hotel Tax (Chicago)
• Local lodging taxes depending on the location

These taxes are collected from guests and remitted to the relevant tax authorities​​.

Lodging taxes in Illinois are separate from state income tax. Operators collect these taxes from guests and remit them to the Illinois Department of Revenue or local tax authorities. This is in addition to the regular state income tax obligations on the income generated from the rental property​​.

Operators in Illinois can potentially deduct various expenses related to their short-term rental properties, including:

• Depreciation of the property
• Appliances, furniture, and household supplies
• Cleaning and maintenance fees
• Marketing and advertising expenses
• Mortgage interest, insurance, and taxes
• Home office deduction
• Commissions and fees
• Professional services
• Travel and transportation expenses
• Rental losses under certain conditions​​.

For short-term rental operators in Illinois, understanding and complying with tax obligations is vital. While this guide provides an overview of taxes and potential deductions, operators should consider consulting with a tax professional for personalized advice, especially regarding federal tax interactions and comparisons with other states.

Short Term Rental Rules By Illinois City

Illinois' major cities implement short-term rental regulations to balance the interests of residents and tourists, with a focus on maintaining community integrity and ensuring safety standards. Compliance with local ordinances and regulations is key for operating successfully in these areas.

Chicago, Illinois Short-term Rental Laws

In Chicago, short-term rentals must comply with stringent regulations to protect residential areas. Hosts must register their properties with the city and adhere to strict safety and noise guidelines. The city enforces a unique tax regime for short-term rentals, including a 4.5% Hotel Accommodation Tax, and requires platforms like Airbnb to share booking details to ensure compliance.

Aurora, Illinois Short-term Rental Laws

Aurora's approach to short-term rentals includes safety inspections and zoning compliance. The city's regulations aim to preserve community integrity while accommodating tourists. Hosts need to register with the city and comply with safety standards, and the city actively enforces these regulations through inspections.

Rockford, Illinois Short-term Rental Laws

Rockford regulates short-term rentals to ensure guest safety and minimize neighborhood disruption. Hosts are required to adhere to local zoning laws and may need to obtain a special use permit. The city's enforcement strategies include fines for hosts who fail to comply with these regulations.

Joliet, Illinois Short-term Rental Laws

In Joliet, short-term rental regulations aim to balance residential quality of life with tourism benefits. Hosts must register their properties and comply with building and fire safety codes. Joliet also enforces specific rules on the number of guests and rental duration to prevent commercial exploitation of residential properties.

Naperville, Illinois Short-term Rental Laws

Naperville's short-term rental rules are designed to ensure guest safety and neighborhood harmony. Hosts are typically required to follow zoning laws and may need permits. Local authorities enforce these regulations to maintain the balance between residential living and short-term tourism.

Springfield, Illinois Short-term Rental Laws

Springfield regulates short-term rentals with an emphasis on safety and community welfare. Hosts need to comply with zoning laws and may face restrictions on the number of guests and rental duration. The city's enforcement mechanisms include regular inspections and penalties for non-compliance.

Peoria, Illinois Short-term Rental Laws

Peoria's short-term rental regulations focus on preserving neighborhood integrity while supporting tourism. Hosts must adhere to zoning regulations and obtain necessary permits, with the city enforcing these rules to ensure that short-term rentals contribute positively to the community.

Elgin, Illinois Short-term Rental Laws

In Elgin, short-term rental rules aim to protect permanent residents' interests. This includes compliance with zoning laws and safety standards. The city enforces these regulations to ensure that short-term rentals do not disrupt the residential nature of neighborhoods.

Waukegan, Illinois Short-term Rental Laws

Waukegan's approach to short-term rentals includes a focus on maintaining affordable housing availability. Hosts are required to register their properties and comply with health and safety standards. The city enforces these rules to ensure that short-term rentals do not negatively impact the local housing market or community well-being.

Cicero, Illinois Short-term Rental Laws

Cicero's short-term rental regulations aim to balance the economic benefits of tourism with residential needs. Hosts must adhere to zoning regulations and obtain necessary permits. The city's enforcement efforts focus on ensuring that short-term rentals operate within the framework of local laws and community standards.

Takeaway

Navigating Illinois' short-term rental landscape requires understanding diverse regulations, from state-defined Airbnb guidelines to city-specific rules in places like Chicago and Aurora. For hosts, compliance with these regulations is key to running successful short-term rentals, ensuring guest safety, and contributing positively to the local community and economy.