Airbnb Host Taxes in Illinois - 2026 Guide

Updated for 2026 (Filing 2025 Taxes)

Tax Basics for Airbnb Hosts in Illinois

Illinois, a state rich in diverse attractions from Chicago’s dynamic urban core to the tranquil beauty of its state parks, naturally fosters a robust short-term rental market. For those leveraging platforms like Airbnb, this presents a significant income opportunity. However, with that income comes the critical responsibility of understanding and complying with federal and state tax regulations. This guide offers a comprehensive overview of key tax considerations for Airbnb hosts operating in Illinois for the 2025 tax year, ensuring you're well-equipped to navigate your tax obligations.

Illinois State Tax Rules for Rental Income

As an Illinois resident, you are required to file an Illinois state income tax return, irrespective of the amount of Airbnb income you generate. Illinois operates on a flat income tax rate, which currently stands at 4.95% for the 2025 tax year. This means all your taxable income, including any earnings from your Airbnb venture, is subject to this same rate. Your Airbnb income must be meticulously reported on your Illinois income tax return.

The primary form for reporting self-employment or business income, such as that detailed on federal Schedule C, is Form IL-1040. If you are reporting depreciation, you'll also need to include Schedule D. Even if your Airbnb activity is considered a passive rental activity and reported on federal Schedule E, the total income still flows through and must be accounted for on Form IL-1040.

A crucial point for hosts is the requirement for estimated tax payments if your anticipated tax liability for the year exceeds $1,000. Failing to make these payments on time can result in penalties from the Illinois Department of Revenue. To avoid surprises, it's paramount to maintain detailed and accurate records of all income received and every expense incurred related to your Airbnb activities. These records are vital for supporting your tax filings. For further information and resources tailored for taxpayers, including guidance on self-employment income, you can always visit the Illinois Department of Revenue website.

The Critical Tax Question: Are You a Business or a Rental?

For any Airbnb host, answering this question correctly is perhaps the most impactful decision for tax purposes, as it directly determines whether you'll owe self-employment tax and if you qualify for valuable deductions like the Qualified Business Income (QBI) deduction. The IRS makes a clear distinction regarding short-term rentals, and understanding this difference is key to optimizing your tax strategy.

• Schedule E (Passive Rental Income): Most casual or less active hosts report their Airbnb income on Schedule E, Supplemental Income and Loss. This classification generally applies if you primarily offer lodging and provide only minimal services to your guests. Minimal services typically include making the space available, cleaning between guests, and basic upkeep. A significant advantage of reporting on Schedule E is that your income is generally exempt from the 15.3% self-employment tax, which covers Social Security and Medicare contributions. However, income reported on Schedule E typically does not qualify for the Qualified Business Income (QBI) deduction.
• Schedule C (Active Business Income): If your Airbnb activities involve providing "substantial services" to your guests, the IRS may classify your venture as an active business. Substantial services go beyond basic lodging and might include daily cleaning, providing meals, offering concierge-style assistance, or regularly engaging with guests in a business-like manner. If your activity rises to the level of an active trade or business, you must report your income and expenses on Schedule C, Profit or Loss From Business. The downside here is that you will be subject to the 15.3% self-employment tax on your net earnings.

Unlock Savings with the Qualified Business Income (QBI) Deduction

If your Airbnb activity is deemed an active trade or business and you report on Schedule C, you might be eligible for the valuable Qualified Business Income (QBI) deduction, also known as the Section 199A deduction. This powerful deduction allows eligible self-employed individuals and small business owners to deduct up to 20% of their qualified business income from their taxable income. This can translate into significant tax savings.

To qualify, your rental activity must generally meet the definition of a "trade or business." The IRS provides a safe harbor for rental real estate enterprises that spend at least 250 hours a year on the activity, keep separate books and records, and maintain certain documentation. While specific income limitations and other rules apply, qualifying for the QBI deduction can effectively reduce your federal income tax liability by a substantial margin.

Top Tax Write-offs for Illinois Hosts

Maximizing your legitimate tax deductions is crucial for lowering your taxable income and, consequently, your overall tax liability. For Illinois Airbnb hosts, a wide array of expenses can be written off. Diligent record-keeping is your best friend here!

• Platform Fees: Any fees charged by Airbnb, VRBO, or similar booking platforms are 100% deductible as direct business expenses.
• Mortgage Interest & Property Taxes: If you are renting out a portion of your primary residence or an entire investment property, you can deduct the percentage of mortgage interest and property taxes that corresponds to the rental space and the period it was available for rent.
• Repairs, Maintenance & Cleaning: Expenses directly related to maintaining and repairing your rental property are deductible. This includes professional cleaning services, cleaning supplies, landscaping for guest areas, and minor repairs like fixing a leaky faucet. Remember, routine maintenance is deductible; major improvements that significantly increase the property's value or extend its useful life are generally depreciated over time.
• Utilities: A portion of utility costs, including electricity, gas, water, internet, and even streaming services provided for guests, can be deducted based on the rental use percentage.
• Insurance Premiums: Homeowner's insurance, specific rental property insurance, or liability insurance for your Airbnb activity are all deductible.
• Supplies & Amenities: Costs for guest toiletries, fresh linens, welcome basket items, coffee, tea, and other consumable supplies provided for guests are legitimate write-offs.
• Professional Services: Fees paid to accountants, tax preparers, lawyers, property managers, or even professional photographers hired to enhance your listing photos are deductible business expenses.
• Advertising & Marketing: Any expenses incurred to promote your listing, beyond the platform fees, are deductible.
• Travel Expenses: If you own a rental property that is not your primary residence and you travel to it specifically for business purposes (e.g., for repairs, maintenance, or property management), these travel costs may be deductible.
• Mileage and Vehicle Expenses: Business-related driving, such as trips to purchase supplies, visit the rental property, or meet with service providers, can be deducted. You can choose between the Standard Mileage Rate or deducting your Actual Expenses (which includes gas, oil, repairs, and even depreciation on the vehicle). Our Advanced Calculator is a powerful tool to help you compare the Standard Mileage Rate versus actual vehicle expenses, including vehicle depreciation, to ensure you select the most advantageous method for your situation.
• Home Office Deduction: If you use a dedicated space in your home regularly and exclusively for managing your Airbnb business-for instance, handling bookings, guest communication, or accounting-you might qualify for the Home Office deduction. This can be a significant saving, and our Advanced Calculator can help you estimate this deduction based on either the simplified method or actual expenses.
• Depreciation: This is one of the most substantial deductions available to rental property owners. Depreciation allows you to recover the cost of your rental property, excluding the land, and any furnishings or appliances over their useful life. While it's a non-cash expense, it can significantly reduce your taxable income. The calculation can be complex, often making it beneficial to consult with a tax professional. Our Advanced Calculator also offers detailed insights into how depreciation, as part of your overall actual expenses, impacts your bottom line.