Illinois Short-Term Rental Rules: A Comprehensive Guide

Quick Answer: Illinois Short-Term Rental Regulations

Illinois has no comprehensive statewide statute for short-term rentals (STRs). Municipalities and counties establish their own rules for permitting, zoning, occupancy limits, and local taxes. The state manages its own tax collection separately.

Key implications:

• Where you operate determines your permit requirements. Chicago has one of the most detailed STR ordinances in the Midwest. Evanston, Galena, and Naperville each have their own frameworks. Unincorporated areas fall under county rules.
• State taxes apply everywhere in Illinois, regardless of whether your municipality has its own STR ordinance.
• Zoning is local. Even with a license, your zoning district may prohibit STR use entirely.
• HOA and condo association rules can override everything else. A city license does not override a private deed restriction.

If you operate or plan to operate an STR in Illinois, your first call is to your city or county planning and licensing department, not Springfield.

State-Level Guidance and Taxation for Illinois STRs

Illinois lacks a statewide STR permitting system; no state agency issues an "STR license." State control focuses on taxation, which applies to all hosts statewide.

Illinois Sales Tax on STR Income

Short-term lodging rentals in Illinois are subject to state sales tax. The Illinois Department of Revenue (IDOR) considers income from short-term rentals as taxable receipts. Consult IDOR guidance for specific definitions of short-term lodging and applicable thresholds.

Consult IDOR directly for the current state sales tax rate and your specific combined rate, as local add-ons vary by municipality.

Hotel Operators' Occupation Tax

The Hotel Operators' Occupation Tax applies to persons engaged in the business of renting rooms in a hotel. IDOR interprets this to include short-term rental platforms and individual hosts renting residential units. Consult IDOR for current applicability and definitions.

Consult IDOR for the current state Hotel Operators' Occupation Tax rate on gross rental receipts. This tax is separate from, and in addition to, state sales tax. Many municipalities also impose their own hotel or accommodation taxes.

Platforms like Airbnb and Vrbo often have tax collection agreements with IDOR and may collect and remit state-level taxes on behalf of hosts. Hosts must verify with IDOR whether their platform covers all applicable state taxes or if direct host remittance is required.

State Business Registration

Illinois does not require a separate state-level business license specifically for STR operators. However, if you operate as a business entity (LLC, partnership, corporation), you must register with the Illinois Secretary of State. Sole proprietors operating under their own name generally do not need state business registration, but anyone collecting and remitting taxes must register with IDOR for a tax account. You can register through IDOR's MyTax Illinois portal.

Landlord-Tenant Law and Short-Term Guests

Illinois landlord-tenant laws generally do not apply to transient guests in STRs. A guest staying for a short duration is typically considered a licensee, not a tenant, meaning standard eviction procedures do not apply. This provides hosts flexibility in guest removal but offers guests fewer statutory protections. If a stay extends beyond a short-term period, the legal relationship may shift toward a tenancy, triggering landlord-tenant obligations. Consult legal counsel for specific guidance on stay durations and tenant rights.

Key Local Ordinances: Chicago, Cook County, and Beyond

Chicago: Shared Housing Ordinance

Chicago has a detailed STR regulatory framework, codified in its Municipal Code. The ordinance distinguishes between two license types:

Shared Housing Unit: The host lives in the unit (or in the same building) and rents out rooms or the entire unit while present or temporarily absent. These are registered through approved Shared Housing Intermediaries (platforms like Airbnb that have city agreements).

Vacation Rental: The host does not live in the unit. These require a standalone Vacation Rental License issued by the City of Chicago Department of Business Affairs and Consumer Protection (BACP).

Key requirements include:

• Units in certain multi-unit buildings may require resident approval before a license is granted. Consult BACP for specific requirements.
• Hosts must post the license number in all listings.
• The city maintains a prohibited buildings list. If your building is on it, you cannot legally operate an STR regardless of license status.
• Vacation Rental licenses require a property inspection.
• Chicago also imposes a Shared Housing Tax on gross rental receipts. Consult BACP for the current rate, which is collected by the platform or remitted directly by the host.

For current license fees and renewal cycles, consult BACP directly, as these figures are subject to change by ordinance amendment and are not reproduced here to avoid citing stale numbers.

Cook County

For STR operators in unincorporated Cook County (outside city limits), the Cook County Code of Ordinances governs. Cook County imposes a Hotel Accommodations Tax on short-term rentals. Consult the Cook County Department of Revenue for the current rate and registration requirements, as the county has updated its accommodation tax rules in recent years to explicitly capture STR platforms.

Incorporated suburbs within Cook County (Oak Park, Evanston, Skokie, etc.) each operate under their own municipal codes. Do not assume Cook County rules apply inside a city's limits.

Comparative Overview: Key Illinois Municipalities

The table below reflects the general regulatory posture of several Illinois municipalities. Fee amounts and timelines vary and should be verified directly with each jurisdiction before applying.

For any municipality not listed, contact the local planning or licensing department. Many smaller Illinois cities have not yet enacted dedicated STR ordinances, which does not mean STRs are unrestricted. General zoning codes and business licensing rules still apply.

Zoning and Where STRs Are Permitted

Local zoning codes determine whether STR use is a permitted use, a conditional use (requiring a special permit), or a prohibited use in a given zone. Residential zones in many Illinois cities either do not list STRs as a permitted use or actively restrict them. Operating an STR in a zone where it is not permitted exposes you to fines and forced closure, even if you hold a license.