Airbnb rentals in Illinois will be getting more expensive starting Jan. 15. The home-rental platform will collect and remit on behalf of its hosts the same hotel taxes paid by its hotel counterparts, the company announced today.
Aligning Airbnb with Hotel Regulations
It’s the latest step by Airbnb to put its rental properties on the same tax and regulatory ground as hotels.
In February, the company began adding the city of Chicago’s 4.5 percent hotel tax to its Chicago hosts’ bills.
However, it has not added the remaining 11.9 percent state tax that hotels are required to remit.
While Airbnb properties have always been subject to both the city and state portions of the hotel tax, the onus had been on hosts to collect and remit the taxes on their own, with little oversight. The moves by Airbnb automatically include them in renters’ bills.
“We’re happy to be taking this important step that helps our host community and makes Illinois stronger,” the company wrote in a blog post announcing the new Illinois tax policy.
Impact on State and Hotel Industry
The move is a win for state coffers and Chicago hoteliers, as it brings the total hotel tax collected by Airbnb properties in Chicago to the full 16.4 percent that hotels collect. That includes:
6.17% state hotel tax
1.08% municipal hotel tax
4.64% in additional taxes that fund:
Illinois Sports Facilities Authority
Metropolitan Pier and Exposition Authority (which operates McCormick Place Convention Center)
Note: All hotels will add 1 percentage point to that tax rate as a result of Cook County’s newly passed 1 percent hotel assessment. It is unclear whether Airbnb will collect that tax as well.
Airbnb and Competitive Taxation
Illinois hotel operators have long argued that Airbnb properties which numbered 4,550 in the year ended June 30, according to the company, should be on the hook for the same hotel taxes that they collect as they compete for Chicago visitors.
“Applying the full state tax to Airbnb hosts is a big step forward in terms of having a level playing field,” said Marc Gordon, CEO of the Illinois Hotel and Lodging Association, which counts more than 450 hotels as members statewide.
Next Steps for Airbnb Hosts
The next step, Gordon said, will be to get Airbnb hosts in Chicago to pay for vacation-rental licenses required by the city for short-term rental properties.
As of February, only 125 residential units in the city had such licenses
Even fewer had bed-and-breakfast licenses, required for single-room rentals
Projected Tax Revenue
Airbnb estimated that its Chicago properties would generate $2.5 million in hotel tax revenue for the city in 2015, but has not projected what its Illinois properties will generate for the state next year.
Frequently Asked Questions
Why are Airbnb rentals in Illinois becoming more expensive?
Starting January 15, Airbnb will begin collecting and remitting the same hotel taxes as traditional hotels in Illinois. This includes both city and state hotel taxes, which were previously the responsibility of individual hosts.
What specific taxes are now applied to Airbnb bookings in Illinois?
Airbnb bookings will now include the full 16.4% hotel tax applicable in Chicago. This consists of a 6.17% state hotel tax, a 1.08% municipal hotel tax, and 4.64% in taxes funding local authorities. An additional 1% Cook County assessment may also apply.
How does this change impact Airbnb hosts?
Hosts no longer need to manually collect and remit hotel taxes. Airbnb will handle this process automatically, making tax compliance easier and more consistent across the platform.
What does this mean for hotels and the state of Illinois?
The tax alignment helps create a more level playing field between hotels and short-term rentals. It also boosts state revenue by ensuring Airbnb rentals contribute the same tax amounts as hotels.
Are there additional requirements for Airbnb hosts beyond tax collection?
Yes. Airbnb hosts in Chicago are still required to obtain city-issued vacation-rental or bed-and-breakfast licenses. As of February, only a small fraction of hosts had the necessary licenses.
