State of Illinois Short-Term Rental Regulations

Short-term rental regulations vary depending on the location and may include zoning laws, occupancy and safety standards, taxation, licensing, and insurance requirements review our guides for more information specific to your city.


Reviewed by Derick Hargrave

Last updated September 12, 2023

Overview of Illinois Short-Term Rental Regulations

Information is maintained by the community to provide helpful insights and links to local regulations, HostScouts does not provide legal or investment advice.

Short-term rentals like Airbnb and Vrbo have exploded in popularity in recent years, offering travelers unique lodging experiences and homeowners new income opportunities. However, with this growth comes increased regulation at the state and local levels. If you're considering becoming a short-term rental host or guest in Illinois, it's important to understand the applicable laws and requirements. This guide provides an overview of key short-term rental regulations in Illinois to help hosts stay compliant, and travelers select proper accommodations.

Defining Short-term Rentals in Illinois

Before diving into the regulations, it's helpful to understand exactly what constitutes a short-term rental in Illinois. This section covers the definition, typical rental periods, different types of rentals, and where oversight occurs.

Official Definition and Rental Period Length

Illinois legally defines a short-term rental as any rental of a residential dwelling unit for a period of 31 days or less. This includes entire houses, apartments, condos, cabins, and other living spaces offered for short stays.

The 31-day cutoff distinguishes short-term rentals from longer-term leases, which are subject to different rules. One month or longer stays do not fall under short-term rental regulations in Illinois.

Types of Short-term Rentals in Illinois

Short-term rentals come in many shapes and sizes in Illinois. Typical types include:

  • Entire home rentals - These involve renting out an entire house, apartment, condo, or cabin that is not shared with the owner. This allows guests to have full privacy and autonomy during their stay.

  • Private or shared room rentals - Some hosts rent out a private or shared room within their primary residence. This offers travelers lower costs while hosts earn income.

  • Accessory dwelling unit (ADU) rentals - ADUs like guest houses, mother-in-law suites, and converted garages can be rented out as short-term lodging. They provide income potential for unused space.

  • Vacation rental homes - Larger second homes or investment properties are commonly rented out as short-term vacation rentals. These are found in resort areas.

Geographic Oversight in Illinois

In Illinois, oversight and regulation of short-term rentals involve multiple levels of government:

  • State law provides a framework for defining and regulating short-term rentals in Illinois. This sets baseline requirements statewide.

  • Counties and municipalities can enact additional local ordinances to regulate Airbnb rentals in their jurisdictions. Local rules may be more restrictive than state law.

  • In unincorporated areas, county regulations govern short-term rental activity. Municipal regulations only apply within incorporated city or town limits.

This shared oversight model allows local governments to fine-tune vacation rental rules to suit their communities. Hosts must follow all applicable state, county, and municipal laws.

Starting a Short-term Rental Business in Illinois

Navigating the registration, licensing, and approval process is key to successfully starting a short-term rental in Illinois. This section outlines the steps hosts should take and provides tips for getting started.

Registration and Licensing Requirements in Illinois

Illinois has mandated statewide registration and licensing for certain short-term rental operators:

  • Hosts renting out two or more units within a building with four or more units must obtain a license from the Department of Public Health. This applies mainly to condos and apartment buildings.

  • Home-sharing hosts who rent space in their primary residence for up to 30 consecutive days at a time are exempt from licensing but must still register with the state.

  • Licensing involves a formal application, fee, inspection, and renewal process. Failure to comply can result in fines.

Local Permitting and Approvals

Beyond state licensing, many Illinois municipalities require hosts to obtain local short-term rental permits. Common permit requirements include:

  • Providing contact, property, and emergency information
  • Paying annual permit fees
  • Attesting that rental units meet safety codes
  • Limiting the number of guests allowed

Hosts should check municipal codes to identify permitting rules in the communities where they plan to operate short-term rentals. Approvals may take 30-90 days.

Tips for Starting a Short-term Rental Business in Illinois

Here are some tips for smoothly starting a short-term rental business in Illinois:

  • Research all applicable laws and secure required state and local licenses/permits early. This avoids compliance issues down the road.

  • Consult with attorneys, tax professionals, and insurance agents to understand legal, tax, and insurance implications.

  • Develop house rules, rental contracts, and other paperwork to codify rental terms and conditions.

  • Evaluate risks and obtain proper insurance coverage for property damage, injuries, etc.

  • Install smart home technology to remotely monitor and manage the property between rentals.

  • Respond promptly to neighbor concerns and complaints related to short-term rental guests.

Following these best practices helps Illinois hosts create successful and sustainable short-term rental businesses.

Housing Rules and Requirements for Illinois Short-term Rentals

In addition to business registration requirements, Illinois short-term rental properties must comply with various housing-related rules and regulations. This section examines occupancy limits, safety codes, inspections, and insurance requirements hosts should know.

Occupancy Limits in Illinois Short-term Rentals

Both state law and local ordinances impose occupancy limits on Airbnb rental properties in Illinois:

  • State law prohibits rentals that allow more than 10 overnight guests per bedroom. Children under 12 don't count toward the limit.

  • Many municipalities further cap total overnight occupants at 2 per bedroom plus 2 additional people. More restrictive local rules supersede state limits.

  • Daytime guests may also be limited. Chicago caps daytime occupants at 1.5 times the permitted overnight occupancy.

Monitoring occupancy is crucial for safety. Exceeding established limits can trigger penalties and license revocation.

Fire Safety and Housing Codes

Short-term rentals in Illinois must comply with state and local fire and building safety codes, including:

  • Installing smoke detectors, fire extinguishers and carbon monoxide detectors

  • Maintaining clear emergency egress routes with operational doors and windows

  • Having properly grounded electrical systems, GFCI outlets near water, and adequate lighting

  • Keeping heating, cooling, and ventilation systems up to code

  • Meeting requirements for bedroom window sizes, room dimensions, and ceiling heights

Non-compliant properties may be barred from operating until violations are corrected.

Inspections, Permits and Certificates

To verify code compliance, Illinois vacation rentals are subject to inspections at multiple points:

  • State licensing inspections conducted by the Department of Public Health

  • Safety inspections are required when applying for local short-term rental permits

  • Periodic fire safety inspections mandated under local laws

  • Inspections after major renovations to confirm work was permitted and completed properly

Certificates of occupancy or compliance may be required following inspections. Completed inspection reports should be retained to demonstrate a rental's lawful operating status.

Insurance Requirements for Illinois Short-term Rentals

Proper insurance coverage is also critical for short-term rental hosts for protection against:

  • Property damage caused by guests
  • Personal injury suffered by guests during stays
  • Loss of rental income from property damage
  • Liability for third-party claims against the host

Standard homeowners or landlord policies often exclude short-term rental activities. Specialized short-term rental insurance should be obtained instead. Hosts should verify that desired coverage, like property damage, liability limits, and loss of income, is included.

Navigating Taxes on Illinois Short-term Rentals

One area hosts must pay close attention to is taxes. In Illinois, short-term rental hosts must collect and remit multiple state and local taxes. Staying tax-compliant avoids financial penalties.

State Taxes on Illinois Short-term Rentals

At the state level, Illinois imposes the following tax obligations on short-term rental hosts:

  • Hotel Operators Occupation Tax - This 6.5% tax applies to rentals of 30 days or less. Hosts collect this tax from guests.

  • Sales Tax - Rentals are subject to Illinois' 6.25% sales tax in most areas. Some cities impose additional local sales taxes.

  • State Income Tax - Income derived from short-term rentals is subject to Illinois' individual and corporate income tax. This is paid directly by hosts.

Proper tax rates must be charged, and all tax revenue collected from guests must be remitted to the state.

Local Taxes on Short-term Rentals

In addition to state taxes, many Illinois municipalities levy their own lodging taxes on short-term rental transactions. These may include:

  • Municipal hotel taxes - City or county hotel taxes ranging from 1-6% on top of state taxes.

  • Local sales taxes - Municipal sales tax on rentals on top of the state sales tax.

  • Tourism taxes - Taxes to fund local convention and tourism bureaus. These range from 1-3%.

Hosts must research the patchwork of local taxes applicable to rentals in their jurisdictions. Exemptions for smaller units may apply in some areas.

Reporting, Remitting and Penalties

Proper reporting and on-time remittance of taxes are crucial for short-term rental hosts in Illinois. Key considerations include:

  • Tax returns are generally filed on a monthly basis using state and local forms. Returns are due on the 20th of the following month.

  • Collected taxes must be remitted when returns are filed. Late payment results in penalties and interest.

  • Short-term rental platforms like Airbnb handle tax collection and remittance for bookings on their sites. Hosts must still file returns reporting amounts collected by the platform.

  • State and local tax IDs are required. Hosts should clearly display all tax ID numbers in their listings.

  • Tax audit risks increase for non-compliant hosts. Maintaining accurate records is essential.

With multiple taxes involved, working with a tax professional can help Illinois hosts stay compliant and avoid missteps.

Final Considerations for Hosts and Guests

By following the guidelines and regulations covered in this article, short-term rental hosts can successfully operate in Illinois while travelers can confidently book compliant accommodations. Here are some final tips for both hosts and guests:

For hosts

  • Regularly review local ordinance changes that may impact your short-term rental

  • Address neighbor concerns promptly to avoid municipal scrutiny

  • Disclose all state and local taxes in listing descriptions to avoid guest confusion

  • Purchase umbrella insurance for an extra layer of protection against liability claims

For guests

  • Verify the rental has visible tax ID numbers before booking

  • Review safety information and request certificates of inspection/compliance

  • Notify hosts and authorities immediately about any safety issues observed

  • Leave the unit as found and be respectful to avoid deposit deductions

Adhering to established rules allows hosts to thrive while providing guests with welcoming short-term rental experiences across Illinois. For additional questions, consult with local officials, legal professionals, and your rental platform.

Illinois Airbnb Regulations by City

Information is maintained by the community to provide helpful insights and links to local regulations, HostScouts does not provide legal or investment advice.

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