Educational information only, not tax advice. Rules and figures change — confirm your situation with a qualified Illinois tax professional before filing.
Illinois · USA · Short-term rental taxes
Short-Term Rental Taxes in Illinois
Illinois STR income is subject to federal and state income tax, and rentals under 30 consecutive days trigger the state Hotel Operators' Occupation Tax — now collected by major platforms as of July 1, 2025.
The 30-Second Answer
- Income tax: Report STR net income on your federal Schedule E (passive rental) or Schedule C (if you provide substantial hotel-like services); Illinois mirrors federal adjusted gross income on Form IL-1040.
- Hotel Operators' Occupation Tax (HOOT): Rentals of fewer than 30 consecutive days are taxable under 35 ILCS 145; register with IDOR via Form REG-1 and file Form RHM-1 (or RHM-7 for multiple locations).
- Platform collection (from July 1, 2025): Hosting platforms such as Airbnb and Vrbo that qualify as 're-renters' under Public Act 104-0006 must collect and remit HOOT directly, potentially relieving individual hosts of that obligation.
- Local taxes: Many Illinois counties and municipalities (including Chicago's Homeshare Tax) layer additional lodging taxes on top of the state rate — check your local jurisdiction before listing.
Deductions
Deductible Expenses for Illinois STR Hosts
When you report rental income, you can offset it with ordinary and necessary expenses — reducing both federal and Illinois taxable income.
Mixed personal/rental use requires you to allocate expenses by the ratio of rental days to total days used. The IRS 14-day / 10% rule determines whether the property is treated as a rental or a personal residence for deduction-limitation purposes. Illinois conforms to federal adjusted gross income, so federal deduction decisions flow through to your IL-1040.
Filing Calendar
Key Dates & Filing Calendar
Illinois STR hosts face both federal income-tax deadlines and ongoing state lodging-tax filing obligations.
If you are still required to file RHM-1 yourself, late filing attracts penalties and interest. Register promptly via MyTax Illinois or Form REG-1.
Illinois Department of Revenue, FY 2025-28 News Release (June 26, 2025); IDOR Hotel Operators' Occupation Tax page (tax.illinois.gov)
Federal Income Tax Treatment
Schedule E vs. Schedule C — Which Applies to Your Illinois STR?
Unlike some countries, the US does not offer a flat-rate or micro-income alternative; the key choice is whether your STR is a passive rental or an active business, which determines your form and self-employment tax exposure.
Schedule E — Passive Rental
Standard treatment for most STR hosts
- Report gross rents and deduct ordinary expenses including depreciation on Schedule E (Form 1040).
- Net rental income is not subject to self-employment (SE) tax — a significant saving.
- Passive-activity loss rules may limit deductions if you have net losses; real-estate-professional status can unlock full deductions.
- Illinois Form IL-1040 picks up federal AGI, so Schedule E results flow through automatically.
No income ceiling
Schedule C — Active Business
Required when you provide substantial hotel-like services
- Report income and expenses on Schedule C (Form 1040); net profit is subject to 15.3% self-employment tax (on first $168,600 for 2024).
- Potentially allows QBI deduction (up to 20% of net income) under IRC §199A if you qualify.
- Illinois does not impose a separate SE tax, but federal SE tax increases your overall burden.
- Consult a tax professional — the IRS scrutinises the passive/active line for STRs closely.
No income ceiling
Depreciation
Depreciation for Illinois STR Properties
Depreciation lets you deduct the cost of your rental property and furnishings over time — often the single largest deduction available to STR hosts.
| Asset | Typical write-off period | Notes |
|---|---|---|
| Residential rental building (structure only) | 27.5 years (straight-line) | Land is not depreciable; allocate purchase price between land and structure. |
| Appliances, furniture & fixtures | 5 years (MACRS) | Bonus depreciation (100% in 2023, phasing down) may allow immediate expensing; confirm current-year rate. |
| Carpeting & flooring | 5 years (MACRS) | Treated as personal property if easily removed; otherwise 27.5-year life. |
| Improvements (roof, HVAC, windows) | 27.5 years or §179/bonus | Qualified improvement property may qualify for bonus depreciation; consult a tax professional. |
Only the rental-use percentage of the property is depreciable. If you use the property personally for part of the year, prorate depreciation by rental days ÷ total days of use.
When you sell the property, accumulated depreciation is subject to federal 'unrecaptured Section 1250 gain' taxed at up to 25%. Illinois taxes this gain as ordinary income at the flat 4.95% state rate.
Hotel Operators' Occupation Tax & Local Lodging Taxes
Illinois Lodging Taxes on Short-Term Rentals
STR hosts in Illinois face a stack of state and local lodging taxes on top of income tax — rates vary significantly by city and county.
The state Hotel Operators' Occupation Tax (HOOT) applies to all rentals of fewer than 30 consecutive days. Counties and municipalities may impose additional hotel/motel taxes. Chicago has its own Homeshare Tax regime. The illustrative stack below uses Chicago as an example — rates in other Illinois cities will differ.
Combined rate varies; Chicago-area STRs can face 10%+ total lodging tax
Illinois Department of Revenue, Hotel Operators' Occupation Tax (tax.illinois.gov); IDOR FY 2025-28 News Release (June 26, 2025)
| Booking type | Who collects & remits | What it means for your books |
|---|---|---|
| Airbnb / Vrbo booking (from July 1, 2025) | Platform collects and remits HOOT as 're-renter' under PA 104-0006 | Tax should appear on guest receipt; verify platform is remitting before assuming you owe nothing |
| Direct booking (your own website) | Host must register, collect from guest, and remit via Form RHM-1 | Add HOOT to your invoice; hold funds in a separate account until remittance date |
| Chicago Homeshare Tax | Host or platform depending on agreement; check Chicago Municipal Code | Chicago has its own registration and remittance requirements separate from IDOR |
Rates shown are illustrative. Always verify current rates with IDOR's Excise Tax Rates database and your local municipality before setting guest pricing. Failure to collect and remit can result in personal liability for the tax plus penalties.
Platforms
How Airbnb, Vrbo & Others Handle Illinois Taxes
From July 1, 2025, major platforms meeting the 're-renter' threshold must collect and remit Illinois HOOT — but income reporting to the IRS remains the host's responsibility.
| Platform | Reports your income | Collects the local lodging tax | Annual earnings summary |
|---|---|---|---|
| Airbnb | 1099-K if >$20,000 & >200 transactions (2025); lower thresholds may apply in future years | Yes — HOOT from July 1, 2025 (re-renter rule); some local taxes also collected | Available in host dashboard by Jan 31 |
| Vrbo / HomeAway | 1099-K at same federal thresholds | Yes — HOOT from July 1, 2025 if qualifying re-renter; verify per booking | Available in host dashboard by Jan 31 |
| Direct / other platforms | No automatic reporting; host responsible for all record-keeping | No — host must register with IDOR and remit RHM-1 independently | Host must maintain own records |
Hosting on Multiple Platforms?
Aggregate all gross rental receipts across platforms to determine your total Illinois income and HOOT liability. If any single platform does not collect HOOT on your behalf, you remain responsible for registering with IDOR and filing Form RHM-1 for those bookings. Keep separate records per platform to avoid double-counting.
US Information Reporting (not DAC7)
Illinois is a US state; EU DAC7 rules do not apply. US platforms report to the IRS under IRC §6050W via Form 1099-K. Illinois does not have a separate state-level platform reporting mandate beyond federal conformity.
Airbnb Help Center, US tax documents (airbnb.com/help/article/414); IDOR FY 2025-28 News Release (tax.illinois.gov, June 2025)
Illustrative P&L: Schedule E vs. Schedule C
Example Illinois STR earning $30,000/year in gross rents
Record-Keeping
Stay Audit-Ready as an Illinois STR Host
IDOR requires lodging-tax records for at least 3.5 years; the IRS generally has 3 years to audit (6 years if income is understated by >25%).
| Keep | How long | Why |
|---|---|---|
| Booking confirmations & guest receipts (all platforms) | At least 4 years | Substantiates gross rental income and number of rental days for HOOT and income-tax purposes |
| HOOT / RHM-1 returns and payment confirmations | At least 3.5 years (IDOR requirement) | IDOR can assess back tax, penalties and interest within this window |
| Expense receipts (repairs, cleaning, supplies, utilities) | At least 4 years | Required to support deductions on Schedule E or C; IRS may disallow undocumented expenses |
| Depreciation schedules and property purchase documents | Life of property + 4 years after sale | Needed to calculate adjusted basis, depreciation recapture and capital gain on eventual sale |
| Personal-use day log | At least 4 years | Determines rental vs. personal-use ratio for expense allocation and the 14-day rule |
IDOR's FY 2025-28 guidance explicitly states that all operators must retain detailed records of taxable and non-taxable sales for a minimum of 3.5 years. Keep digital backups in a cloud service.
Estimator
Short-Term Rental Tax Estimator
Plug in your bookings and costs to see your likely taxable position.
Your Numbers
Total short-term-rental income, before costs.
Allowable running costs, mortgage interest, depreciation and platform fees.
Your top income-tax band, as a percentage.
Estimated tax owed
Income tax on your net rental profit at your marginal rate.
Illustrative estimate. A simplified model to orient you — it is not tax advice. Confirm your situation with a qualified local professional.
Sources & notes
This page is for educational purposes only and does not constitute tax or legal advice. Tax laws change frequently — always verify current rates and rules with the Illinois Department of Revenue (tax.illinois.gov) and a qualified tax professional before filing.
- Illinois Department of Revenue — FY 2025-28 News Release — Hotel Operators' Occupation Tax Updates for Hosting Platforms for Short-Term Rentals (June 26, 2025). Describes re-renter classification, registration, Form RHM-1, and record-keeping requirements. tax.illinois.gov/research/news/fy-2025-28-news.html
- Illinois Department of Revenue — Hotel Operators' Occupation Tax — Statutory reference 35 ILCS 145/1–10; registration via MyTax Illinois or Form REG-1; Form RHM-1 filing. tax.illinois.gov/research/taxinformation/excise/hotel.html
- Sales Tax Institute — Illinois Expands Hotel Tax to STR Platforms — Analysis of Public Act 104-0006 and economic nexus thresholds ($100,000 receipts or 200 transactions). salestaxinstitute.com (2025)
- IRS — Topic No. 414, Rental Income and Expenses — Federal guidance on Schedule E vs. Schedule C treatment, deductible expenses, and cash-basis accounting for rental income. irs.gov/taxtopics/tc414
- University of Illinois Tax School — Tax Rules for Rentals and Vacation Homes — Explanation of the 14-day rule, personal-use day calculations, and mixed-use rental reporting under IRS Topic 415. taxschool.illinois.edu (July 2024)
- Airbnb Help Center — US Tax Documents — 1099-K threshold ($20,000 / 200 transactions for 2025), 1099-MISC ($600), and document availability dates. airbnb.com/help/article/414
- Avalara MyLodgeTax — Illinois Vacation Rental Tax Guide — Overview of Illinois state and local lodging-tax obligations for STR hosts. avalara.com/mylodgetax (2024–2025)
Questions
Frequently Asked Questions — Illinois STR Taxes
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