Airbnb Host Taxes in Chicago, Illinois - 2026

Updated for 2026 (Filing 2025 Taxes)

Mastering Your Chicago Airbnb Taxes: A Guide for Illinois Hosts

Chicago’s world-class architecture and legendary festivals make it a goldmine for short-term rental hosts, but the tax landscape can be as complex as a layout of the Loop. Whether you're renting out a condo in River North or a coach house in Wicker Park, you aren't just a host: you're a small business owner in the eyes of the IRS and the Illinois Department of Revenue. Understanding how to navigate federal, state, and local Chicago taxes is the difference between a profitable side hustle and a costly audit.

Maximize Your Returns with Our Advanced Calculator

Before diving into the paperwork, it's essential to know your numbers. We recommend using our Advanced Calculator to simplify your filing process. Unlike basic tools, our calculator allows you to compare the "Standard Mileage Rate" against "Actual Expenses" for your host-related travel. It also helps you factor in "Depreciation" and calculate specific "Home Office" savings if you manage your bookings from a dedicated space in your home. These small distinctions often lead to thousands of dollars in tax savings.

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

The IRS looks at short-term rentals through two different lenses, and the one they choose determines whether you'll owe an extra 15.3% in self-employment taxes. It all comes down to the level of service you provide to your guests.

• Schedule E (Passive Rental Income): Most Chicago hosts fall here. If you provide basic lodging, utilities, and cleaning between guests, your income is considered "passive." You won't owe self-employment tax, which is a significant win for your bottom line.
• Schedule C (Active Business Income): If you provide "substantial services" - such as daily linen changes, providing breakfast, or offering guided tours of the city - the IRS treats you like a hotel. In this case, you'll report on Schedule C and be subject to the 15.3% self-employment tax.

The 20% Bonus: The QBI Deduction

One of the most powerful tools in a host's arsenal is the Qualified Business Income (QBI) deduction, also known as Section 199A. If your Airbnb activities rise to the level of a "trade or business," you may be eligible to deduct up to 20% of your qualified business income from your federal taxes. This is a "below-the-line" deduction that reduces your taxable income regardless of whether you itemize. It’s a complex area of tax law, but for profitable Chicago hosts, it's often the single largest tax break available.

Illinois State and Chicago Local Tax Nuances

Illinois keeps things relatively simple with a flat income tax rate, which is currently 4.95% for the 2025 tax year. You'll report your net rental income on your Illinois Form IL-1040. However, Chicago hosts have an extra layer of responsibility. The City of Chicago imposes a Hotel Accommodations Tax and a Shared Housing Surcharge. While platforms like Airbnb often collect and remit these local taxes on your behalf, it's your responsibility to verify that these "pass-through" taxes are being handled correctly. Don't assume the platform has it covered; double-check your gross earnings reports against your city registrations.

Top Tax Write-offs for Chicago Hosts

To keep more of your hard-earned Chicago rental income, you need to be aggressive but accurate with your deductions. Here are the most common expenses you can write off:

• Platform Fees: The 3% to 5% commission Airbnb charges you is 100% deductible.
• Depreciation: This is the "silent" deduction. You can deduct the cost of the building (not the land) over 27.5 years. Even if your property value is increasing, the IRS allows this deduction to account for wear and tear.
• Chicago-Specific Maintenance: Don't forget the costs of snow removal services during those harsh Illinois winters or the cost of professional deep cleans after a guest stays for Lollapalooza or a convention at McCormick Place.
• Utilities and Internet: You can deduct the portion of your heat, electricity, and high-speed internet used for the rental. If you’re renting a room in your primary residence, you’ll need to prorate these based on square footage.
• Insurance: Regular homeowners insurance often doesn't cover commercial short-term rentals. If you’ve purchased a rider or a specific short-term rental policy, those premiums are deductible.
• Supplies and Amenities: Everything from the "Chicago Welcome Basket" (local coffee or snacks) to the extra towels and toiletries you provide can be deducted.

Managing taxes for a Chicago short-term rental doesn't have to be a headache. By staying organized, utilizing our Advanced Calculator, and taking advantage of deductions like QBI, you can ensure your hosting business remains a financial success.