Illinois Short Term Rental Tax: The Complete 2026 Guide

Illinois short term rental tax rules changed dramatically over the past year. The state Hotel Operators' Occupation Tax (HOOT), once aimed squarely at hotels and motels, now applies to Airbnb and VRBO listings, hosting platforms, and re-renters across the state. Add Chicago's layered city taxes and the local hotel taxes that dozens of municipalities impose, and Illinois hosts face one of the more complex lodging tax systems in the country.

This guide covers every tax that applies to short term rentals in Illinois in 2026: the state Hotel Operators' Occupation Tax rate and how it is calculated, the July 2025 and July 2026 law changes, Chicago's vacation rental surcharge, local hotel taxes in cities like Naperville, Rockford, and Springfield, what Airbnb and VRBO collect for you, and how to register and file with the Illinois Department of Revenue. For zoning, licensing, and permit rules, see our Illinois short term rental laws guide. Before investing, compare markets with our free STR market data to determine which areas generate the best returns.

Taxes That Apply to Short Term Rentals in Illinois

If you rent rooms, an apartment, a house, a condominium, or any dwelling unit to guests for stays of less than 30 consecutive days, Illinois treats you as a hotel operator for tax purposes. Here is the full stack of applicable taxes an operator may need to collect and remit:

• State Hotel Operators' Occupation Tax (HOOT): 6% of 94% of gross rental receipts, an effective rate of about 5.64% statewide, administered by the Illinois Department of Revenue (IDOR).
• Chicago area taxes administered by IDOR: the Chicago Municipal Hotel Tax, the Illinois Sports Facilities Tax, and the Metropolitan Pier and Exposition Authority (MPEA) Hotel Tax all apply to short term rentals located in Chicago and are collected on the same state return.
• Chicago Hotel Accommodations Tax: 4.5%, administered by the Chicago Finance Department, plus a 6% Vacation Rental and Shared Housing Surcharge that applies only to short term rentals, for a combined 10.5% city rate.
• Other local hotel taxes: municipal hotel motel tax rates of roughly 4% to 8% in cities such as Naperville, Rockford, Springfield, Bloomington, and East Peoria, paid directly to the local jurisdiction.
• Illinois income tax: a flat 4.95% on net rental profit, after allowed deductions.

Outside Chicago, the total lodging tax on a booking typically runs 10% to 14% of gross rental receipts. Inside Chicago, the effective combined rate on vacation rentals reaches roughly 23% to 24%, among the highest short term rental tax burdens of any city in the country.

The State Hotel Operators' Occupation Tax

The Hotel Operators' Occupation Tax Act (35 ILCS 145) imposes a state tax on persons engaged in the business of renting, leasing, or letting rooms to guests for periods of less than 30 consecutive days. The statute's definition of a hotel is broad: it covers hotels, motels, inns, lodging houses, tourist homes, apartment houses, and any building where rooms or living quarters are rented to the public, which is why vacation rental units, cottages, and single family homes listed on Airbnb qualify.

The rate is 6% of 94% of gross rental receipts. In practice, IDOR lets operators multiply total receipts by 94%, then apply the 6% rate, which works out to an effective state tax of about 5.64% of the gross rental charge. Gross receipts include the listing price and generally any mandatory charges required to occupy the unit; separately stated, optional charges may be treated differently, so review how your cleaning fees are structured with a tax professional.

Two important carve-outs limit who is subject to the tax:

• Permanent residents: receipts from a guest who occupies the unit for 30 consecutive days or more are exempt. Once a guest crosses the 30 day threshold, they are considered a permanent resident rather than a transient, and the tax no longer applies to that stay.
• Owner occupied small operations: gross rental receipts are exempt if the dwelling is the operator's primary residence with at least one room rented while owner occupied, or a non owner occupied dwelling rented for fewer than qualifying thresholds under current law. The exemption rules were narrowed by recent legislation, so verify your status before assuming you qualify.

What Changed: Hosting Platforms and Re-Renters Now Pay

Public Act 104-0006, signed in June 2025, was the biggest change to Illinois lodging tax in decades. Beginning July 1, 2025, the Hotel Operators' Occupation Tax expanded beyond traditional hotel operators to cover two new groups:

• Hosting platforms: websites and apps like Airbnb and VRBO that facilitate short term rental bookings are now directly liable for collecting and remitting the state tax on Illinois listings they process.
• Re-renters: businesses and individuals who rent rooms or blocks of rooms and then re-rent them to guests, including online travel agencies and arbitrage operators, are also subject to the tax on their receipts.

For most hosts, the practical effect is positive: platforms now collect and remit the state tax on platform bookings automatically. But the law did not eliminate operator obligations. If you accept direct bookings through your own website, by phone, or through any channel that is not a registered hosting platform, you remain responsible for registration, collection, and remittance on those receipts.

July 1, 2026 Changes: The Hotel Marketplace Facilitator Rules

A second round of amendments took effect July 1, 2026, refining how platforms and re-renters are taxed (IDOR bulletin FY 2026-33). Key provisions to be aware of:

• The law now uses a "hotel marketplace facilitator" definition, aligning lodging tax with the marketplace facilitator framework used for sales and use tax.
• The old 200-transaction threshold was removed. A facilitator is now subject to the tax if it exceeds $100,000 in gross receipts from Illinois bookings, determined on a quarterly lookback basis.
• Re-renters can no longer claim a credit for tax paid to the original operator; the remittance responsibility structure was reorganized to prevent double collection while closing gaps.

If you operate through major platforms, these changes mostly happen behind the scenes. If you run your own booking site or work with smaller channels, confirm whether each channel meets the facilitator definition, because that determines who is responsible for the tax on each reservation.

How to Register, File, and Pay the State Tax

Operators with any direct booking activity must register with the Illinois Department of Revenue before collecting the tax. Here is the complete process:

• Register through MyTax Illinois, the state's online portal. Registration is free, and you receive an account for hotel tax filing. There is no separate paper copy requirement if you complete registration online.
• Collect the tax from guests on each taxable booking. Most operators pass the tax through as a separate line on the guest folio or listing checkout.
• File Form RHM-1, the Hotel Operators' Occupation Tax Return, by the last day of the month following the reporting period. Monthly filing is standard; operators with small liabilities may be assigned a less frequent schedule. Operators with multiple locations attach Form RHM-7, the multiple-site schedule.
• Pay electronically through MyTax Illinois by the same due date. Returns must be filed for every period, even when no tax is due.

Keep complete records of every reservation, including booking dates, the number of nights, gross rental receipts, platform-collected taxes, and exempt stays, for at least three and a half years. If IDOR reviews your account, documentation is what separates a quick close from an assessed liability with penalty and interest.

Chicago Short Term Rental Taxes in Detail

Chicago layers more lodging taxes on short term rentals than any other Illinois city. A vacation rental or shared housing unit in Chicago is subject to all of the following:

• State HOOT: 6% of 94% of receipts (effective 5.64%).
• Chicago Municipal Hotel Tax: 1% of 99% of receipts, collected by IDOR on the state return.
• Illinois Sports Facilities Tax: 2% of 98% of receipts, collected by IDOR. This tax funds the Illinois Sports Facilities Authority.
• MPEA Hotel Tax: 2.5% of receipts, collected by IDOR for the Metropolitan Pier and Exposition Authority, which operates McCormick Place and Navy Pier near Lake Michigan.
• Chicago Hotel Accommodations Tax: 4.5% of the gross rental charge, filed with the Chicago Finance Department on Form 7520.
• Vacation Rental and Shared Housing Surcharge: 6% (a 4% surcharge plus a 2% domestic violence surcharge), stacked on top of the 4.5% base for registered shared housing units and vacation rentals.
• Cook County Hotel Accommodations Tax: 1%, administered by Cook County.

The combined effective hotel tax rate in Chicago is about 17.4% before the surcharge; adding the city's 6% short term rental surcharge pushes vacation rentals to roughly 23.4%, and the Cook County tax brings the total higher still. Note that the new 1.5% Tourism Improvement District assessment introduced in 2026 applies only to hotels with 100 or more rooms in designated areas, so it does not affect short term rental operators.

Chicago area taxes administered by IDOR are reported on the same RHM-1 return as the state tax, which simplifies filing. The city's own Hotel Accommodations Tax and surcharge are filed separately with the Chicago Finance Department. Hosts on major platforms will see most of these amounts collected at checkout, but the legal responsibility to verify collection stays with the operator.

Local Hotel Taxes Outside Chicago

IDOR does not collect any local hotel taxes other than the Chicago area taxes listed above. All other local taxes are paid directly to the local taxing authority, and rates vary widely by municipality and county. Examples of municipal hotel motel tax rates in major Illinois markets:

• Naperville: 5.5% Hotel and Motel Use Tax, which the city has clarified applies to online rental companies and short term rentals.
• Rockford: 5% city hotel tax on room rental receipts.
• Springfield: 8% hotel motel tax, one of the higher home rule rates downstate.
• Bloomington and East Peoria: local rates in the 6% to 8% range, typical for mid-size markets.
• Marion and East St. Louis: smaller markets generally impose 5% to 6%.

Many counties also impose their own hotel tax on top of, or instead of, the municipal rate, particularly in unincorporated areas. Because these local taxes are administered locally, registration, due dates, and forms differ by city. Contact the finance department in the municipality where your property is located to determine the exact rate, whether platforms remit it for you, and how to register. Local revenue from these taxes typically funds tourism promotion, so local authorities actively look for unregistered listings.

What Airbnb and VRBO Collect for You

Since the 2025 law change, hosting platforms are directly required to collect and remit the state Hotel Operators' Occupation Tax on Illinois bookings. Airbnb also collects Chicago's taxes on Chicago listings, including the Hotel Accommodations Tax and the vacation rental surcharge, and it collects some municipal hotel taxes where it has agreements in place. VRBO similarly collects state and many local lodging taxes at checkout.

Three things platforms do not do for you:

• They do not collect taxes on direct bookings. Any reservation that does not run through the platform is entirely your responsibility.
• They do not always cover every local tax. Check your transaction records and confirm with your municipality which taxes the platform remits on your behalf and which you must handle.
• They do not file your returns. If you are a registered operator with any direct booking receipts, you must still file for each period, reporting platform-collected receipts as instructed on the form.

Review your platform payout reports each month and reconcile the collected taxes against your own booking records. Discrepancies are common when listings span a rate change or when a unit's registration status changes mid-year.

Exemptions From Illinois Lodging Tax

The main exemptions that matter for short term rental operators:

• Permanent residents: stays of 30 consecutive days or more are exempt from the state tax and from most local hotel taxes. Mid-term rental strategies built around 30 day-plus stays can eliminate lodging tax entirely, though lease and landlord-tenant rules then apply.
• Foreign diplomats: guests holding a valid tax exemption card issued by the U.S. Department of State are exempt. Verify the card and keep a copy for your records.
• Qualifying owner occupied rentals: limited exemptions exist for hosts renting rooms within their primary residence, subject to conditions that were tightened by recent legislation.

Document every exempt stay. If you cannot substantiate an exemption during a review, IDOR will treat the receipts as taxable and assess the tax with penalty and interest.

Illinois Income Tax on Rental Revenue

Beyond lodging taxes, net income from your Illinois rentals is subject to the state's flat 4.95% individual income tax and federal income tax. Standard deductions apply: mortgage interest, property taxes, insurance, utilities, management fees, supplies, repairs, and depreciation all reduce taxable profit. Short term rental operators who materially participate may also unlock powerful federal benefits; see our guides on the STR tax loophole and material participation rules for how cost segregation and bonus depreciation can offset W-2 income.

Lodging taxes you collect from guests are not income to you, and lodging taxes you absorb rather than pass through are deductible as a business expense.

Penalties and Enforcement

Illinois assesses both late filing and late payment penalties on hotel tax returns, plus interest that accrues from the original due date. Failure to register before doing business as an operator is itself a violation. Since the platform reporting rules took effect, IDOR can cross-reference hosting platform data against its registration rolls, which makes unregistered direct-booking operators much easier to find. Chicago separately enforces its shared housing registration and tax rules, and unregistered listings face fines and delisting.

The safest approach: register before your first taxable booking, calendar every due date, file every period even at zero, and keep records that tie each reservation to the amounts reported on each return.

Compliance Checklist for Illinois Hosts

• Confirm whether your unit is subject to the state tax or qualifies for an exemption.
• Register on MyTax Illinois before accepting direct bookings.
• Register your unit with the city of Chicago if applicable, and with your local municipality where required.
• Verify exactly which taxes Airbnb and VRBO collect for your listings, and which you must collect yourself.
• Collect the correct total rate on all direct bookings, itemized on the guest receipt.
• File Form RHM-1 by the last day of the month following each reporting period, plus any local returns.
• Reconcile platform payout reports against your booking records monthly.
• Keep documentation for exempt stays, including 30 day-plus reservations.
• Report net rental profit on your Illinois and federal income tax returns.

Illinois Short Term Rental Tax FAQ

What is the Illinois hotel tax rate for short term rentals?

The state Hotel Operators' Occupation Tax is 6% of 94% of gross rental receipts, an effective rate of about 5.64%. Local hotel taxes add anywhere from 4% to 8% in most cities, and Chicago's combined stack pushes the total effective rate on vacation rentals to roughly 23.4%.

Does Airbnb collect Illinois hotel tax for hosts?

Yes. Since July 1, 2025, hosting platforms are required to collect and remit the state Hotel Operators' Occupation Tax on Illinois bookings, and Airbnb also collects Chicago's city taxes and some municipal hotel taxes. Hosts remain responsible for taxes on direct bookings and for any local taxes the platform does not cover.

Are stays of 30 days or longer taxed in Illinois?

No. Receipts from guests who occupy a unit for 30 consecutive days or more are exempt from the Hotel Operators' Occupation Tax. The guest is treated as a permanent resident rather than a transient, and most local hotel taxes follow the same 30 day rule.

How do I file the Illinois Hotel Operators' Occupation Tax?

Register through MyTax Illinois, then file Form RHM-1 and pay by the last day of the month following each reporting period. Operators with multiple properties attach the RHM-7 multiple-site schedule, and a return is required for every period even when no tax is due.

What taxes does a Chicago Airbnb host pay?

A Chicago short term rental is subject to the state tax, the IDOR-collected Chicago Municipal Hotel Tax, Illinois Sports Facilities Tax, and MPEA Hotel Tax, plus the city's 4.5% Hotel Accommodations Tax, the 6% Vacation Rental and Shared Housing Surcharge, and Cook County's 1% tax, a combined effective rate of roughly 23% to 24%.

Do I pay local hotel tax outside Chicago?

Usually yes. Most Illinois municipalities impose a hotel motel tax, such as 5.5% in Naperville, 5% in Rockford, and 8% in Springfield, paid directly to the local taxing authority. Rates, registration, and filing rules vary by city, so check with the finance department where your property is located.

Illinois rewards operators who get compliance right from day one: register before your first booking, know exactly which taxes your platforms collect, file every return on time, and document exempt stays. If you are evaluating an Illinois vacation rental market for investment, use our free STR market data and Surge Score to compare revenue potential across areas.

Want help managing your short term rentals in Illinois? Surge's full service management handles lodging tax compliance, dynamic pricing, and guest service, and we make sure you never pay a penalty for a missed filing. Book a free intro call or reach us at (888) 616-8149 to learn how we help owners collect, file, and remit lodging tax while maximizing revenue.

For more on managing taxes across your portfolio, explore our state-by-state tax guides for Oregon, Virginia, Colorado, and Washington, and our Illinois short term rental laws guide for zoning and licensing rules.