Property Management Taxes In Illinois

Updated August 7, 2026

18 min read

This guide covers the taxes that actually apply to a property management company operating in Illinois, and to the rental income it handles on behalf of owners. Every figure below is tied to the statute, agency rule, or published guidance that sets it, so you can confirm a rate or deadline before acting on it.

State Income Tax On Rental And Management Income

Illinois taxes individual income at a single flat rate, so rental income a manager collects and remits to an owner is taxed at the same rate no matter how large the portfolio. Illinois layers a separate Personal Property Replacement Tax on business entities, which means an LLC or partnership that owns rentals owes an entity-level tax even though the income itself passes through to the owners. Partnerships and S corporations may also elect to pay an entity-level pass-through entity (PTE) tax. Corporations pay the corporate income tax plus the higher replacement tax rate.

The Illinois individual income tax rate is 4.95% of net income, and the same 4.95% rate applies to trusts and estates. This rate has been in effect since July 1, 2017. (Illinois Department of Revenue, Income Tax Rates (effective July 1, 2017))
Corporations pay Illinois income tax at 7% of net income. (Illinois Department of Revenue, Income Tax Rates)
The Personal Property Replacement Tax is 2.5% of net income for corporations other than S corporations, and 1.5% of net income for partnerships, trusts, and S corporations. A property management company or rental-holding LLC taxed as a partnership therefore owes 1.5% at the entity level in addition to the tax its owners pay on their distributive shares. (Illinois Department of Revenue, Income Tax Rates, Personal Property Replacement Tax)
Partnerships and S corporations may elect to pay the Pass-through Entity (PTE) tax for tax years ending on or after December 31, 2021. Each partner or shareholder gets a credit equal to 4.95% of their distributive share of the electing entity's net income. The election is made annually on Form IL-1065 or Form IL-1120-ST. (Illinois Department of Revenue, What is the Pass-through Entity (PTE) tax?)
Public Act 104-0453 removed the expiration date on the Illinois Pass-through Entity tax, so the election remains available going forward. (Informational Bulletin FY 2026-15, What's New for Illinois Income Taxes)
For tax years beginning on or after January 1, 2026, Illinois decouples from the federal 100% bonus depreciation rate under Public Act 104-0453. Owners who expensed appliances, flooring, or other qualifying rental property improvements at the federal level will have an Illinois addback. (Informational Bulletin FY 2026-15, What's New for Illinois Income Taxes, Public Act 104-0453)
The Illinois personal exemption is $2,850 for tax year 2025 and increases to $2,925 for tax year 2026. (Informational Bulletin FY 2026-15, What's New for Illinois Income Taxes)

Sales Tax On Rent: What Applies And What Does Not

Illinois does not impose sales tax on rent for real property. The Retailers' Occupation Tax reaches sales of tangible personal property, not real estate or services, and the new lease tax that took effect January 1, 2025 covers leases of tangible personal property only. Short-term stays are a different matter: the Hotel Operators' Occupation Tax reaches any dwelling rented for fewer than 30 consecutive days, including houses, apartments, condominiums, and cottages, whether owner-occupied, tenant-occupied, or non-owner-occupied. As of July 1, 2025 the tax also reaches hosting platforms that qualify as re-renters.

The Illinois Retailers' Occupation Tax is imposed on persons engaged in the business of selling tangible personal property at retail. Services and real property are not included, so long-term residential and commercial rent is not subject to Illinois sales tax. (Illinois Department of Revenue, Sales and Use Taxes, Retailers' Occupation Tax)
Effective January 1, 2025, Public Act 103-592 treats a lease of tangible personal property as a sale at retail, so lessors must register with IDOR and pay tax on lease and rental receipts using Form ST-1. This lease tax applies to tangible personal property only, not to leases of real property. (Publication 113-L, Lease Tax FAQs; Public Act 103-592)
The Hotel Operators' Occupation Tax applies to gross receipts from renting rooms for periods of less than 30 consecutive days. A hotel includes short-term rentals, defined as an owner-occupied, tenant-occupied, or non-owner-occupied dwelling, including an apartment, house, cottage, or condominium, where at least one room is rented for fewer than 30 consecutive days. (Illinois Department of Revenue, Hotel Operators' Occupation Tax)
The state Hotel Operators' Occupation Tax rate is 6% of 94% of gross receipts. (Illinois Department of Revenue, Excise Tax Rates and Fees, Hotel Operators' Occupation Tax)
Chicago hotel receipts carry additional state-administered taxes on top of the state rate: the Illinois Sports Facilities Authority tax at 2% of 98% of gross receipts, the Metropolitan Pier and Exposition Authority tax at 2.5% of gross charges, and a municipal hotel tax at 1% of 99% of gross receipts. (Illinois Department of Revenue, Excise Tax Rates and Fees)
No hotel tax is due where there is a binding contract with someone occupying a room for at least 30 consecutive days. If the contract terminates before the 30 days end, tax is owed for the period through termination. (Illinois Department of Revenue, Hotel Operators' Occupation Tax, permanent resident exemption)
Beginning July 1, 2025, under Public Act 104-0006, hosting platforms for short-term rentals that meet the definition of re-renter are subject to the Hotel Operators' Occupation Tax. A hosting platform is a person providing an online application, software, website, or system through which an Illinois short-term rental is advertised or held out to the public as available to rent. (Informational Bulletin FY 2025-28, Hotel Operators' Occupation Tax Updates for Hosting Platforms for Short-Term Rentals; Public Act 104-0006)
Re-renters headquartered outside Illinois with no physical presence must determine quarterly whether they meet either threshold: cumulative gross receipts of $100,000 or more from Illinois rentals, or 200 or more separate Illinois rental transactions. Determination dates are March 31, June 30, September 30, and December 31. (Informational Bulletin FY 2025-28)
Hotel operators, including hosting platforms that qualify as re-renters, file Form RHM-1, Hotel Operators' Occupation Tax Return, and Form RHM-7 if the operator has receipts from multiple sites. (Illinois Department of Revenue, Hotel Operators' Occupation Tax; Informational Bulletin FY 2025-28)

Property Tax

Illinois property tax is entirely local. The Department of Revenue does not administer it. Township and county assessors set assessed value, county clerks extend rates, and county collectors and treasurers bill and collect. The statutory assessment level is one third of fair market value outside the large classifying counties, with Cook County using its own classification percentages. Homestead exemptions turn on owner occupancy, so tenant-occupied rentals get none of them.

The Illinois Department of Revenue does not administer property tax. It is managed by local governments including cities, counties, and taxing districts. (Illinois Department of Revenue, Property Tax)
Except in counties with more than 200,000 inhabitants that classify property for taxation, each tract or lot of property is valued at 33 1/3% of fair market value. (35 ILCS 200/9-145, statutory level of assessment; Publication 136, Property Assessment and Equalization)
Cook County classifies property and assigns different assessment levels by class, ranging from 10% of market value for residential property to 25% of market value for commercial property. A multifamily residential building in Cook County is therefore assessed on a different basis than one in a downstate county. (Publication 136, Property Assessment and Equalization)
Illinois property taxes are billed in two installments and paid in arrears. Under 35 ILCS 200/21-15, unpaid taxes become delinquent on the later of June 1 or the day after the first installment due date, and on the later of September 1 or the day after the second installment due date. Because county boards set the actual mailing and due dates, installment dates differ by county and shift from year to year, so confirm current dates with the county treasurer or collector rather than relying on a fixed calendar. (35 ILCS 200/21-15)
Delinquent property tax bears interest at 1.5% per month in counties with fewer than 3,000,000 inhabitants. In counties with 3,000,000 or more inhabitants, the rate is 1.5% per month for tax years before 2023 and 0.75% per month for tax year 2023 and later. (35 ILCS 200/21-15)
Where delinquency is the fault of the mortgage lender, the interest is charged against the mortgage lender and not the mortgagor. (35 ILCS 200/21-15)
The General Homestead Exemption is available for residential property occupied by its owner as his or her principal dwelling place. Tenant-occupied rental property does not qualify. The one narrow exception is a leasehold interest on which a single-family residence is situated, where the lessee occupies the property and is liable for the taxes. (Illinois Department of Revenue, Property Tax Exemptions (PIO-74))
The Senior Citizens Homestead Exemption, the Low-income Senior Citizens Assessment Freeze Homestead Exemption, and the Homestead Improvement Exemption all require the property to be the claimant's principal residence, so none of them apply to a tenant-occupied rental unit. (Illinois Department of Revenue, Property Tax Exemptions (PIO-74))

Withholding And Employer Taxes

An Illinois property management company withholds income tax from employee compensation at the flat individual rate, reports quarterly on Form IL-941, and pays unemployment insurance contributions to the Illinois Department of Employment Security. Separately, if the management entity or a rental-holding entity is a partnership or S corporation with nonresident owners, it must remit pass-through withholding on their behalf unless they file an exemption certificate.

Illinois withholding is 4.95% of compensation, matching the individual income tax rate. It also applies to Illinois lottery winnings over $1,000 and other gambling winnings subject to federal withholding. (Illinois Department of Revenue, Income Tax Rates, withholding (payroll))
Form IL-941, Illinois Withholding Income Tax Return, is due quarterly by the last day of the month that follows the end of the quarter, and must be filed electronically through MyTax Illinois or IDOR-approved software. If the due date falls on a weekend or holiday, the return is due the next business day. (2026 Form IL-941 Instructions)
The 2026 Form IL-941 due dates are April 30, 2026, July 31, 2026, November 2, 2026, and February 1, 2027. (2026 Form IL-941 Instructions)
For calendar year 2026, only the first $14,250 of wages paid to a worker is subject to Illinois unemployment insurance contributions. The 2026 State Experience Factor is 102% and the Fund Building Rate is 0.550%. (IDES Form EA-50 (11/2025), 2026 State Experience Factor and Employers' UI Contribution Rates)
Partnerships must report and pay pass-through withholding on behalf of nonresident partners unless the partner has provided Form IL-1000-E, Certificate of Exemption for Pass-through Withholding. The same rule applies to S corporations and their nonresident shareholders. (Form IL-1065 Instructions; Form IL-1120-ST Instructions)
Pass-through withholding must be paid in full on or before the original due date of the return even though an automatic filing extension has been granted. Partnerships pay with Form IL-1065-V and S corporations with Form IL-1120-ST-V. (Form IL-1065 Instructions; Form IL-1120-ST Instructions)
An investment partnership that elects to pay the PTE tax is not thereby exempt from withholding for its nonresident partners. It must withhold from each applicable nonresident partner before calculating the PTE tax. (Publication 129, Pass-through Entity Information)

Federal Obligations

Federal treatment is the same in Illinois as everywhere else. Rental income and expenses land on Schedule E, residential rental buildings depreciate over 27.5 years using the mid-month convention, and a management company that pays vendors or remits owner distributions in the course of its trade or business has 1099 filing duties. The reporting threshold jumped for payments made after December 31, 2025.

Rental income and expenses are reported on Schedule E (Form 1040). Rental income means any payment received for the use or occupation of property and must generally be included in gross income. (IRS Publication 527, Residential Rental Property)
Residential rental property is depreciated over a 27.5-year recovery period and nonresidential real property over 39 years, both using the mid-month convention. Depreciation begins when the property is ready and available for its intended use, not when a tenant moves in. (IRS Publication 527, Residential Rental Property)
Advance rent must be included in income in the year received regardless of the period it covers. A security deposit is not income if you plan to return it, but any amount kept because of a lease violation is income in the year you keep it. (IRS Publication 527, Residential Rental Property)
For payments made during 2025, the reporting threshold is $600 for nonemployee compensation on Form 1099-NEC and for rents on Form 1099-MISC. For payments made after December 31, 2025, the minimum reporting threshold increased to $2,000 and may be adjusted for inflation beginning in calendar year 2027. (Instructions for Forms 1099-MISC and 1099-NEC, What's New)
Rents are reported in Box 1 of Form 1099-MISC, covering real estate rentals as well as machine and pasture rentals. (Instructions for Forms 1099-MISC and 1099-NEC)
Form 1099-NEC must be filed with the IRS and furnished to recipients by January 31. Form 1099-MISC must be furnished to recipients by January 31 and filed with the IRS by February 28 on paper or March 31 if filed electronically. (Instructions for Forms 1099-MISC and 1099-NEC)
Report on Form 1099-MISC or Form 1099-NEC only when payments are made in the course of your trade or business. (Instructions for Forms 1099-MISC and 1099-NEC)
Landlords must keep records documenting acquisition cost and basis, improvements capitalized separately, the split between deductible repairs and capitalized improvements, and depreciation claimed. (IRS Publication 527, Residential Rental Property)

Filing Deadlines

Illinois individual returns follow the federal April 15 date, business income and replacement tax returns are due the 15th day of the fourth month after year end, withholding returns are quarterly, and hotel tax returns are monthly for most operators.

The 2025 Form IL-1040 is due April 15, 2026 for calendar year filers. Illinois grants an automatic six-month extension of time to file, to October 15, 2026, but the extension does not extend the time to pay. (Illinois Department of Revenue, Due Date and Extension to File Income Tax Return (2025 IL-1040))
Form IL-1065, Partnership Replacement Tax Return, is due on or before the 15th day of the 4th month following the close of the taxable year, with an automatic six-month filing extension. (Illinois Department of Revenue, Who must file Form IL-1065 and when is its due date?)
Form IL-941 is due quarterly by the last day of the month following the end of the quarter, and must be filed electronically. (2026 Form IL-941 Instructions)
Monthly filers of Form RHM-1, Hotel Operators' Occupation Tax Return, must file on or before the last day of the month following the month being reported. Quarterly and annual filing options exist if IDOR notifies the operator. (Illinois Department of Revenue, Hotel Operators' Occupation Tax)
Pass-through withholding for nonresident partners and shareholders must be paid in full by the original due date of the entity return, notwithstanding the automatic filing extension. (Form IL-1065 Instructions)

Registration And Recordkeeping

Illinois business tax accounts are opened through MyTax Illinois using Form REG-1. Records supporting reported receipts must be kept for three and a half years, and longer if a liability notice has been issued. Property management for others is a licensed activity regulated under the Real Estate License Act of 2000.

Register a new Illinois business tax account through MyTax Illinois by selecting Register a New Business (Form REG-1). Processing takes approximately one to two business days. (Illinois Department of Revenue, REG-1 Illinois Business Registration Application)
In general, you must keep books and records that document receipts for the reporting period covered by your return for three and a half years after you have filed an original or amended return. (Publication 113, Keeping Complete and Accurate Records)
If a Notice of Tax Liability or Final Notice of Tax Due has been issued, records for the period covered by that notice must be kept until the liability has been finalized or discharged. (Publication 113, Keeping Complete and Accurate Records)
Records that must be kept include documentation of all sales, leases, or rental purchases, documents about inventory changes and shipments, daily records of gross sales, records of merchandise purchased such as vendor invoices or purchase orders, and a yearly inventory of stock on hand. (Publication 113, Keeping Complete and Accurate Records)
Real estate activity in Illinois, including brokerage and leasing agent work, is governed by the Real Estate License Act of 2000, codified at 225 ILCS 454 and administered by the Illinois Department of Financial and Professional Regulation. The implementing administrative rules are at 68 Ill. Adm. Code 1450. (225 ILCS 454, Real Estate License Act of 2000; 68 Ill. Adm. Code 1450)
Lessors of tangible personal property subject to the lease tax that took effect January 1, 2025 must register with IDOR as retailers and file Form ST-1, Sales and Use Tax and E911 Surcharge Return, through MyTax Illinois, reporting tax on receipts as they are collected over the lease term. (Publication 113-L, Lease Tax FAQs)

Recent Changes Worth Tracking

Effective January 1, 2025: Illinois sales and use tax now applies to leases and rentals of tangible personal property. Lessors are treated as retailers, must register with IDOR, and report lease receipts on Form ST-1 as collected. The tax applies to gross receipts received on or after the effective date, including receipts under contracts signed earlier. It does not reach leases of real property. (Public Act 103-592; Publication 113-L, Lease Tax FAQs; Informational Bulletin FY 2025-15)
Effective July 1, 2025: The Hotel Operators' Occupation Tax was extended to hosting platforms for short-term rentals that meet the definition of re-renter. Out-of-state re-renters with no physical presence must register once they hit $100,000 in cumulative Illinois gross receipts or 200 separate Illinois rental transactions, measured quarterly. (Public Act 104-0006; Informational Bulletin FY 2025-28)
Effective Enacted by Public Act 104-0453: The expiration date on the Illinois Pass-through Entity tax was removed, keeping the entity-level election available for partnerships and S corporations. (Informational Bulletin FY 2026-15, What's New for Illinois Income Taxes)
Effective Tax years beginning on or after January 1, 2026: Illinois decoupled from the federal 100% bonus depreciation rate, creating an Illinois addback for rental property owners who take full federal bonus depreciation. (Public Act 104-0453; Informational Bulletin FY 2026-15)
Effective Tax year 2026: The Illinois personal exemption rose from $2,850 for 2025 to $2,925 for 2026. (Informational Bulletin FY 2026-15)
Effective January 1, 2026: The Illinois unemployment insurance taxable wage base is $14,250 for calendar year 2026, with a State Experience Factor of 102% and a Fund Building Rate of 0.550%. (IDES Form EA-50 (11/2025))

Tax is one half of Illinois compliance. See our guide to Illinois property management laws and regulations for licensing, trust account, and disclosure rules.

Keeping This Straight

Tax rates and thresholds move more often than most operators expect, and the figures circulating in older articles go stale quickly. Check any rate against its citation before you quote it to an owner, and re-check them at the start of each tax year.

This guide is a starting point for professional managers, not tax or legal advice. For a specific filing, work with a CPA familiar with Illinois rental property, and confirm current figures with the Illinois Department of Revenue or the IRS. Each figure still has to trace back to a record, which is where rental property accounting done monthly rather than annually pays off.