Airbnb Rules in Illinois | Airbnb Laws, Taxes, and Regulations

Airbnb Rules in Illinois | Airbnb Laws, Taxes, and Regulations

Over the past decade, the short term rental industry has undergone many changes. Airbnb has completely transformed the way to book accommodations for family vacation and on business trips. Renting out a spare room or even the entire house on Airbnb has brought in some substantial income for hosts. In 2022, Airbnb is projected to be a $130 billion company. The company has spent the last decade expanding to more than 34,000 cities and 191 countries.

When discussing the short term rental market as a whole, according to Statista, revenue in the Vacation Rentals segment is projected to reach US$17,660m in 2022 with a growth rate of 6.2%. In the Vacation Rentals segment, the number of users is expected to amount to 62.9m users by 2026 with a user penetration of 17.2% in 2022 and is expected to hit 18.2% by 2026. The average revenue per user (ARPU) is expected to amount to US$305.79. In the Vacation Rentals segment, 80% of total revenue is projected to be generated through online sales by 2026. In global comparison, most revenue will be generated in the United States (US$17,660m in 2022).

Why is Knowing Airbnb Laws, Taxes, & Regulations Important?

You should understand how your city or county's laws work before you decide whether to become an Airbnb host. In some cities, you are not allowed to host paying guests for short periods of time. City zoning and administrative codes often include such laws. If you want to list your property or accept guests, you may have to register, obtain a permit, or obtain a license. Certain types of short-term accommodations may be prohibited.

The enforcement of these laws varies greatly among local governments. Fines or penalties may be imposed, so you need to be aware and keep updated regularly on any laws, taxes or regulations that may change over time.

While there are a number of factors that must be taken into consideration before setting up an Airbnb listing, it is important to comply with the law as well as the rules and regulations of Airbnb, and that the listing is legally compliant.

This content is for those thinking about becoming an Airbnb host or planning on investing in an Airbnb in the State of Illinois, USA.

Airbnb Rules in Illinois

Get to know “the Prairie State of the Midwest”

Illinois, fondly known as “the Prairie state of the midwest”, is a state in the Midwestern region of the United States. Chicago is the state's largest city and the fifth-largest city in North America. The capital is in Springfield, located in the center of the state. This state has the fifth-highest GDP of $886 billion in the nation, while it has the sixth largest population of 12,671,821, and the 25th largest land area of 57,913 SQ. MI. in the United States.

Illinois is a great destination and the state's extensive cultural attractions and great shopping make it a fun place to visit any time of year. The city of Chicago is the most popular destination in the state, drawing tourists from across the country and around the world. Here you'll find some of the state's best retail options, restaurants, museums, and cultural venues. Additionally, the city is home to a number of spectacular buildings designed by architects like Frank Lloyd Wright and Louis Sullivan. Springfield, the state capital, also offers visitors a number of things to see and do, such as the Abraham Lincoln Presidential Library and Museum and the Dana-Thomas House.

Airbnb Rules in Illinois

Illinois is known mostly as the "Land of Lincoln" as Abraham Lincoln spent most of his life there. In addition it is also the birthplace of the late Golden Girl actress Betty White who was born in Oak Park, Illinois, as well as Winnetka. Illinois is home to the Home Alone (Christmas movies) original movie house, which was bookable on Airbnb during Christmas of 2021 as an Airbnb experience.

Throughout the state, you will find interesting places to visit, from a prehistoric Indian settlement at Cahokia Mounds to the tranquil Anderson Japanese Gardens in Rockford. Home to an arena of top attractions, Illinois welcomes more than 110 million visitors per year, who spend billions of dollars annually, giving ample opportunity for property managers and hosts to set up shop in this beautiful state of the United States of America.

How is a Short-Term Rental Defined in Illinois?

For tax purposes, short-term rentals in Illinois are defined as reservations of fewer than 30 consecutive days.

Local Short-Term Rental Regulations

Operators of short-term rentals in Illinois should be aware of local regulations that apply to them, such as:

Homeowner Association Requirements

In Illinois, homeowners associations (HOAs) may also have specific rules regarding vacation rentals. You should familiarize yourself with the association's policies as a member. It is important to review this information to learn about any restrictions or limitations on short-term vacation rentals.

Other regulations associated with leases/subletting or condo/co-op rules may apply to your situation. A good place to start is by reviewing your signed lease and speaking with your landlord or property manager.

Airbnb Laws in Illinois

Short-Term Rental Tax in Illinois

In the event that you have registered with tax authorities, you will be able to collect the rental tax, which will be added to the guest's bill.

If you collect payment from short-term guests renting out a room, apartment, house, or other dwelling, you’re likely responsible for collecting, filing, and remitting short-term rental taxes to Illinois tax authorities.

Short-term rental tax compliance depends heavily on the location of your rental. Depending on your address, you're required to report to which tax jurisdictions, which taxes you're required to collect, and which tax rates apply.

Registering with State Tax Authorities

Before you can begin collecting taxes on your short-term rental in Illinois, you’re legally required to register with the Illinois Department of Revenue.

You can register online. Once you’ve registered, you’ll receive a certificate of registration and taxpayer ID as well as instructions on filing your lodging taxes. You may also be required to register with local tax authorities.

__Side Note : __ In Illinois, you don’t need to form an LLC to register with tax authorities.

Taxes applicable to Illinois Short-Term Rentals

You may have to pay a number of different lodging taxes in Illinois depending on the location of your short term rental property.

The following tax remittances should be filed and remitted to the Illinois Department of Revenue

1. Illinois Hotel Operators’ Occupation Tax

5.98-6.17% of the listing price including any cleaning fee for reservations 29 nights and shorter. Guests who book via Airbnb and are located in the State of Illinois will pay this tax as part of their reservation. For detailed information, visit the State of Illinois Tax website.

2. Illinois Sports Facilities Hotel Tax (Chicago)

5.73% of the listing price including any cleaning fee for reservations 29 nights and shorter. Guests who book via Airbnb and are located in the State of Illinois will pay this tax as part of their reservation. For detailed information, visit the State of Illinois Tax website.

3. Metropolitan Pier and Exposition Authority Hotel Tax (Chicago)

4. Municipal Hotel Tax (Chicago)

County or city lodging taxes need to be filed and remitted to the local tax authority, depending on the location of the property.

Tax Rates

Tax rates for short-term rental properties should be determined before you begin collecting them. Rates can and do change frequently, so it's imperative that you have the latest rate in order not to overcharge or undercharge your guests.

Tax rates, guest registration requirements, frequency of returns per year, and the minimum number of days rented to qualify as a taxable stay will vary depending on your Illinois address.

To view the complete list of Illinois tax rates, click here

What Charges are Taxable in Illinois?

  1. In Illinois, anything the host requires the guest to pay in order to use the accommodation is considered part of the rental fee. This includes items such as cleaning fees, pet fees, rollaway bed fees, extra person fees, etc.

  2. Fees for optional laundry services or food and beverage purchases aren’t subject to lodging taxes. However, they may be subject to sales taxes.

  3. Before collecting any short-term rental taxes from your guests, you need to be aware of whether any taxes have already been collected for you. When you list your property on Airbnb, these taxes are collected on behalf of you when a listing is booked. In the case it is not collected you as the host are responsible to collect and remit state taxes to the state.

Each year, OTAs add new jurisdictions to the list of locations where they collect lodging taxes on behalf of hosts. Check with your OTA to determine what taxes they collect in your jurisdiction.

Exempt Taxes for Guests

In Illinois, there are situations where lodging taxes do not have to be collected. Short-term lodging taxes will not apply to a guest renting for the long-term rather than a short-term period.

Also note that in Illinois, foreign diplomats are exempt from the Hotel Operators' Occupation Tax.

Airbnb Rules in Illinois

Filing Short-term Rental Tax Returns

The Illinois Department of Revenue needs to receive your tax returns after you have collected taxes from your guests. In Illinois, you can file your returns online. You will need to enter details about how much you charge for your rentals in order to file. Additionally, you must pay the tax amount due.

__Side Note : __ Be sure to double-check your returns before submitting them. Typos, missing signatures, and incorrect tax information can all lead to delays.

Filing Tax Returns

You’ll be assigned a filing frequency and due dates when you register with the tax authority. For filing with the Illinois Department of Revenue, due dates are as follows:

Monthly Due the last day of the month following the close of the filing period

Annually Due by January 31 each year

Special Note : Whether or not short-term rental income was earned or short-term rental taxes were collected, short-term rental operators are required to file returns with the Illinois Department of Revenue each assigned filing period. Local tax authorities may have their own requirements for such returns. They are commonly known as "zero dollar returns."

Are there Penalties for Filing Taxes late?

If you offer short-term rentals on a marketplace like Airbnb or directly to consumers, you may be liable for state and local taxes. Taxes are an important source of funding for local governments, which is why tax authorities are becoming more aggressive in their efforts to identify those who do not comply with tax laws. Tax authorities in Illinois may impose fines and interest payments if you fail to register with them and fail to file your short-term rental tax returns on time.

Illinois Voluntary Disclosure Agreement (VDA)

Hosts of short-term rentals in Illinois may be able to take advantage of a voluntary disclosure agreement (VDA). By entering into a binding agreement with the Illinois Department of Revenue, hosts have the opportunity to proactively disclose prior period tax liabilities. VDAs are offered to encourage cooperation with state tax laws and may result in some or all penalties and interest payments being waived.

Conclusion

You'll be ready to start earning from your Airbnb listing once you have completed these important steps and have obtained the necessary approvals to start up your Airbnb listing. Make sure you are vigilant and stay up-to-date on the new requirements and regulations introduced by Airbnb or your local authorities at all times.

Ready to find out how Hostaway can transform your business?