In Illinois the exemption turns on what your LLC hands back for the deed, and on how the mortgage is counted

The Illinois Exemption, and the Conditions That Void It

Three separate levies can attach to one Illinois deed. The state tax is imposed by 35 ILCS 200/31-10 "on the privilege of transferring title to real estate located in Illinois, on the privilege of transferring a beneficial interest in real property located in Illinois, and on the privilege of transferring a controlling interest in a real estate entity owning property located in Illinois." Counties may impose their own under 55 ILCS 5/5-1031. And home rule municipalities impose their own on top of both, under their own ordinances, Chicago's being by far the largest of them.

The county tax is tied to the state one by statute: 5-1031 provides that "All deeds or trust documents exempted in Section 31-45 of the Property Tax Code shall also be exempt from any tax imposed pursuant to this Section." A home rule municipal tax carries no such automatic link, so clearing the state exemption does not tell you what the city will charge.

The exemption itself is short: 35 ILCS 200/31-45(e) covers "Deeds or trust documents where the actual consideration is less than $100." Everything then depends on the Department of Revenue's rule. 86 Ill. Adm. Code 120.20(e)(7) treats a deed given "as a gift" as qualifying. 120.20(e)(8) treats a deed given "so as to effect a change of identity or form of organization or ownership" as not qualifying where the full actual consideration is $100 or more, and the rule's own worked example is a landlord's transaction in all but name: "Party A transfers real estate valued at $100,000 to a partnership in exchange for a 30% interest in the partnership's assets ... The full actual consideration for the transfer, Party A's $90,000 partnership interest, exceeds the $100 threshold so it does not qualify."

A capital contribution documented as an exchange for membership interests is measured by the value of those interests. A gift with nothing issued in return is not, where nothing else moves with the deed. On a mortgaged rental something does: 120.20(b)(2) defines full actual consideration to include "the amount of any mortgages, regardless of whether the underlying indebtedness is assumed or taken subject to", and it is full actual consideration that (e)(8) measures the $100 threshold against. So the loan sits inside the figure the threshold tests, and calling the deed a gift does not by itself dispose of the question for anyone with a loan on the property. Put your own facts to the county recorder and to an Illinois attorney; the published materials do not close this one.

On mortgages Illinois runs the opposite way to most states, and the relief is conditioned on a recital. Section 31-10 provides that "If, however, the transferring document states that the real estate, beneficial interest, or controlling interest is transferred subject to a mortgage, the amount of the mortgage remaining outstanding at the time of transfer shall not be included in the basis of computing the tax," and 5-1031 repeats it word for word for the county tax. Read the condition: the transferring document has to say so.

The Department's PTAX-203 instructions carry a dedicated line for it, "Enter an amount only if the deed or trust document states that the transferred property remains subject to a mortgage at the time of the transfer", and the administrative rule allows the deduction at 120.20(c)(2)(C) "unless the parties delay its discharge with the intent to avoid or underpay this tax." A deed that is silent about the loan is a deed with nothing to deduct. There is a genuine tension in the drafting a careful reader will spot, because 31-5 defines "Value" to include "the amount of any lien on the real property assumed by the transferee"; 31-10, 5-1031, the rule and the form all then take the outstanding mortgage back out.

Illinois also closed the obvious exit. Section 31-5 defines a "controlling interest" as "more than 50% of the fair market value of all ownership interests or beneficial interests in a real estate entity," and a "real estate entity" as one "that exists or acts substantially for the purpose of holding directly or indirectly title to or beneficial interest in real property," with "a rebuttable presumption that an entity is a real estate entity if it owns, directly or indirectly, real property having a fair market value greater than 75% of the total fair market value of all of the entity's assets." A single-property rental LLC is squarely inside that presumption, for most of them the building is essentially the whole balance sheet. Selling the company rather than the property is a taxable event in its own right here.

Whatever the state does, counties and municipalities in Illinois can levy transfer tax of their own on the same deed. Whether a local exemption follows the state one varies, and it is not safe to assume either way. Check with the recorder for the county the property sits in before you assume the total.

Illinois also taxes transfers of a controlling interest in an entity that owns real property, which is aimed at the obvious workaround, selling the LLC rather than the building. How far it reaches varies: some states apply it to any realty-holding entity, others only above an ownership threshold or only to commercial property, so whether it touches a residential rental is a question for the state’s own rules rather than something to assume in either direction.

Authority: 35 ILCS 200/31-45(e); 86 Ill. Adm. Code 120.20(e)(7) and (e)(8). ilga.gov

Does the Transfer Reset Your Property Tax in Illinois?

No. Illinois does not cap a property’s assessed value at what you paid for it, assessments track market value on the assessor’s own cycle regardless of who holds title. A deed from you to an LLC you own does not change the assessment, because there was never an acquisition-date value locked in to lose. This is the part of the California story that gets copied onto pages about states where it simply does not apply.

The valuation statute has no ownership trigger in it. Outside counties of more than 200,000 inhabitants, 35 ILCS 200/9-145 provides that "Each tract or lot of property shall be valued at 33 1/3% of its fair cash value," and the section contains no acquisition-value cap and nothing that revalues a parcel because it was deeded. Illinois assesses to a fraction of current value on a general assessment cycle, so there is no locked-in figure for a transfer to break.

The exposure is on the homestead side, and only where a residence is being converted. The general homestead exemption at 35 ILCS 200/15-175 is available only for property "occupied by its owner or owners as his or their principal dwelling place," in an amount of "$10,000 in counties with 3,000,000 or more inhabitants," "$8,000 in counties that are contiguous to a county of 3,000,000 or more inhabitants" and "$6,000 in all other counties" for taxable years 2023 and after. Once the property is let, it is not the owner's principal dwelling place and the exemption ends. That happens because of the tenancy, not because of the LLC, and it would happen if you kept the property in your own name.

Two honest limits. We read the valuation section and the homestead section, not the general assessment cycle provisions at 35 ILCS 200/9-215 and 9-220, and not the Cook County classification ordinance. And Illinois assessment is administered county by county, with Cook running on its own classification system. So the conclusion here rests on the absence of a transfer trigger in the valuation statute rather than on a positive statement from an assessor that a deed to your own LLC changes nothing. The township or county assessor for the property is the office that can say so for your parcel.

Separately, and this catches people converting a former home into a rental: the benefits that turn on owning and occupying the property as your residence, a homestead exemption, an owner-occupancy credit, a residential assessment rate, are not things an LLC occupies a home to earn. Where the property still carries one, the deed puts it at risk, and the bill goes up whether or not the assessment itself moves. Which benefit is at stake, and on what terms, is a question for the assessor in the county the property sits in.

Authority: 35 ILCS 200/9-145; 35 ILCS 200/15-175, ilga.gov

Moving a Property You Already Own Into the LLC in Illinois

1. 1

   Decide how the deed will be documented before anyone drafts it

   In Illinois this is the decision that sets the tax. 86 Ill. Adm. Code 120.20(e)(7) treats a deed given as a gift as qualifying for the 31-45(e) exemption; 120.20(e)(8) treats a deed given to effect a change of identity or form of organization as not qualifying where the full actual consideration reaches the threshold, and a membership interest issued in exchange is that consideration. The accounting and the deed have to tell the same story, and the story determines the bill.

2. 2

   If the property is mortgaged, make sure the deed says so

   The exclusion of the outstanding mortgage from the taxable base under 35 ILCS 200/31-10 and 55 ILCS 5/5-1031 is conditioned on the transferring document stating that the property is transferred subject to the mortgage. The PTAX-203 line for it says to enter an amount "only if the deed or trust document states" it. A deed that omits the recital gives up a deduction that was available for the cost of a sentence.

3. 3

   Ask your servicer for written consent

   The Illinois transfer tax provisions say nothing about your loan. Deeding to an LLC is a transfer of title, which is what a due-on-sale clause is written to catch, and the Garn-St Germain list of protected transfers covers inter vivos trusts rather than limited liability companies. Ask before recording rather than after.

4. 4

   Check the municipality separately from the state and county

   The county tax exempts whatever 31-45 exempts, by statute. A home rule municipality's transfer tax is its own ordinance with its own exemption list, and it doesn't automatically mirror the state's. If the property is in a home rule city, that city's revenue department is the only office that can tell you what its ordinance does with a transfer to a wholly owned LLC.

5. 5

   Prepare PTAX-203 and record with the county recorder

   The declaration is where the consideration, the mortgage line and the exemption position are disclosed, and it travels with the deed. Once it's recorded, update the leases, the landlord insurance and any municipal landlord registration to name the LLC as owner. The registration update is the step nothing prompts you to do.

6. 6

   If you're using a series, file the certificate of designation for each one

   Under 805 ILCS 180/37-40(b) the liability shield doesn't exist until the certificate of designation is filed, and subsection (d) says the series' existence begins on that filing. The articles must also carry notice of the limitation on liabilities, and each series' name must commence with the entire name of the LLC. Budget for the annual report component the statute charges for each series in effect.

One LLC Per Property, or One for the Portfolio?

Illinois authorises series LLCs, and a series can be filed with the state in its own right.

Illinois series are a public filing, not a private book entry, and the difference matters. 805 ILCS 180/37-40(a) lets an operating agreement "establish or provide for the establishment of designated series of members, managers or limited liability company interests having separate rights, powers or duties with respect to specified property or obligations." But the shield in subsection (b) is a chain of five conditions, and two of them are filings: separate records must be maintained and the assets of each series "held ... and accounted for separately"; the operating agreement must so provide; notice of the limitation on liabilities must be "set forth in the articles of organization"; and the company must have "filed a certificate of designation for each series which is to have limited liability under this Section."

Subsection (d) then confirms that "Upon the filing of the certificate of designation with the Secretary of State setting forth the name of each series with limited liability, the series' existence shall begin." Miss the certificate and there is no wall, however careful the operating agreement is.

Two practical consequences landlords tend to discover late. First, naming: under subsection (c) a series name "must commence with the entire name of the limited liability company." A series is publicly and permanently identified as a limb of the parent, so the idea that separate series make separate-looking owners does not survive contact with the statute.

Second, the fee structure is a different schedule rather than a discount. 805 ILCS 180/50-10 provides that "the fee for filing articles of organization (domestic), application for admission (foreign), and restated articles of organization (domestic) in connection with a limited liability company with a series or the ability to establish a series pursuant to Section 37-40 of this Act is $400" (against $150 for an ordinary LLC) and the annual report fee is "$75 plus $50 for each series for which a certificate of designation has been filed pursuant to Section 37-40 of this Act and is in effect on the last day of the third month preceding the company's anniversary month."

So the recurring cost scales with the number of properties either way. The saving from a series is not on the annual bill; it is one entity to manage, one set of governance, and one set of transfer paperwork at the front end. Which is worth more in Illinois than in a state without a transfer tax, because every separate LLC in a separate-entity structure means another deed, another PTAX-203 and another exemption position to get right in front of another county recorder.

ilga.gov

What Creditors Can Reach, What the Illinois Statute Says

The reason to hold a rental in an LLC is usually to keep a claim arising at the property from reaching everything else you own. The reverse question matters just as much and gets far less attention: if someone wins a judgment against you personally, can they reach the rental inside the LLC? That is what a state’s charging-order provision decides.

Illinois's LLC act expressly allows a court to foreclose on a charged membership interest, alongside whatever exclusive-remedy language the same section carries.

805 ILCS 180/30-20 is headed "Rights of creditor," and it uses the older uniform vocabulary of "distributional interest" rather than the transferable interest language later acts adopted. Subsection (g) is the exclusivity clause, and it is a strong one on its face: "This Section provides the exclusive remedy by which a person seeking to enforce a judgment against a member or transferee may, in the capacity of judgment creditor, satisfy the judgment from the judgment debtor's distributional interest. If and to the extent that other law permits a judgment creditor to obtain a lien against the distributional interest or other rights of a member or transferee of a member, the lien shall be treated as a charging order subject to all the provisions of this Section." That second sentence is doing real work: it sweeps liens obtained under other law back into this section rather than letting them run outside it.

Subsection (c) is why the answer above is not simply "exclusive remedy." It reads: "At any time the court may foreclose the lien and order the sale of the distributional interest. The purchaser at the foreclosure sale obtains only the distributional interest, does not thereby become a member, and is subject to Section 30-10." Note the opening words. Many states working from related uniform texts allow foreclosure only on a showing that distributions will not pay the judgment within a reasonable time. Illinois imposes no such precondition in the section. The power is available at any time. What the buyer takes is bounded, though: the distributional interest only, without membership, and subsection (a) adds that "A charging order grants no other rights with respect to the assets or affairs of the company."

One silence worth naming. The section does not use the words "single member" or "sole member" anywhere, so a one-owner rental LLC, the structure most Illinois landlords actually form, is neither expressly protected nor expressly carved out. Illinois simply did not address it, which is a different position from a state that did.

We are reporting what the section says, not what a court would do with your facts. Outcomes turn on how the LLC was capitalised, how it has been operated and what the creditor is owed, and none of that is something a page can assess. If the answer above is load-bearing for you, it is a question for a Illinois attorney.

Authority: 805 ILCS 180/30-20, ilga.gov

Three Problems No State Transfer Rule Solves

These land the same way in Illinois as everywhere else. One because it is federal law, two because they are contracts you signed. Which is exactly why they get left off state pages. They are also the three most likely to actually cost a landlord money, so they are here rather than buried.

The due-on-sale point is the one that generates the most bad advice. The Garn-St Germain Depository Institutions Act, at 12 U.S.C. § 1701j-3(d), bars a lender from enforcing a due-on-sale clause on nine categories of transfer of residential property of fewer than five dwelling units. The one people cite is the eighth: a transfer into an inter vivos trust in which the borrower is and remains a beneficiary and which does not relate to a transfer of rights of occupancy in the property. Neither that paragraph nor any of the other eight names a transfer to a limited liability company. The protection quoted for an LLC transfer is written for trusts, and the occupancy qualifier is the limb that matters most to a landlord, because a rental is occupied by someone else.

One honest caveat on that list. The ninth category is open-ended. It reaches any other transfer described in regulations issued under the Act, at 12 C.F.R. § 591.5(b), so it is a list that can be extended by regulation rather than a closed set fixed by the statute. We have not read those regulations end to end, and say so rather than describing the statute as more settled than we checked.

In practice lenders often do not call a loan when payments keep arriving, and that is genuinely what usually happens, but “usually not enforced” is a different thing from “not permitted,” and only one of them is a plan. The way to find out is to ask your servicer for written consent before you record, not after.

Which deed you use is a decision, not a formality. A quitclaim deed transfers whatever interest you happen to have and warrants nothing, which is why it is the cheap default for a transfer between yourself and your own company, and why title professionals warn against it. It can leave a gap in the chain of title that surfaces years later when you sell or refinance, and because it warrants nothing it gives the LLC no recourse against you if a defect turns up. A warranty deed carries the covenants across. Which one is appropriate depends on how the property was acquired and what your title history looks like, and it is a question worth asking before the deed is drafted rather than after it is recorded.

Tell your title insurer before you record. An owner’s title policy insures the person named in it. Convey the property to an LLC and the insured owner and the record owner are no longer the same. Which is the fact pattern in which coverage gets argued about at the worst possible moment, when a claim is already live. Some insurers will endorse an existing policy across to the entity, sometimes for a modest fee; some will not, and a new policy means a new premium on the current value. Either way it is a phone call before the deed rather than a discovery afterwards, and it belongs in the same budget as the tax above.

On the fourth thing people ask about: beneficial ownership reporting. Under 31 C.F.R. § 1010.380, a “reporting company” is an entity formed outside the United States and registered to do business in a State, and paragraph (c)(2)(xxiv) separately exempts any entity created by filing with a Secretary of State. A rental LLC you form in Illinois is therefore exempt and files no beneficial ownership report. Pages telling you to file within 30 days of formation are describing the rule as it stood before March 2025. The exception runs the other way: an LLC formed in another country and registered to do business in Illinois does still report. More on what compliance actually requires →

Does Illinois Make You Register the Rental?

We could not confirm whether Illinois imposes a statewide registration requirement. What we tried is recorded at the end of this page. Ask the state housing agency directly rather than relying on the absence of an answer here.

This is a genuine gap in the record rather than a negative finding, and it's worth being precise about what failed. The Illinois Attorney General's site serves a JavaScript-only shell: illinoisattorneygeneral.gov returns HTTP 200 with no landlord-tenant content readable, and every landlord-tenant path we tried returned 404. No Illinois state housing agency page stating the position could be reached. So the question of whether any statewide rental registration exists is open here, and we're not going to guess at the answer by inference from the absence of a page. The Attorney General's Consumer Fraud Hotline is the state-level office to ask.

The municipal question is open on this page for the same reason: we couldn't establish which Illinois municipalities require a landlord to register, we read no ordinance, and the record behind this page carries no source for it, so we're not going to name cities we haven't checked. The clerk, housing or building department for the municipality the property sits in is the office that can answer it. If a registration does exist there, it attaches to the rental unit rather than to the owner's legal form, so it survives the transfer and the entry will need to name the LLC once the deed is recorded.

If You Rent Short-Term in Illinois

A short-term let is a different tax animal from a twelve-month tenancy, and the LLC has nothing to do with it. The lodging tax follows the stay, not the owner.

Illinois taxes short-term rentals through the Hotel Operators' Occupation Tax, and they are inside the base by definition rather than by analogy. Department of Revenue Publication 106 defines "Hotel" as "Any building or buildings in which the public may, for a consideration, obtain living quarters, sleeping or housekeeping accommodations," a list that "includes, but is not limited to: inns, motels, tourist homes or courts, lodging houses, rooming houses and apartment houses, retreat centers, conference centers, hunting lodges, and short-term rentals."

A short-term rental is "An owner-occupied, tenant-occupied, or non-owner-occupied dwelling ... where: at least one room in the dwelling is rented to an occupant for a period of less than 30 consecutive days, and all accommodations are reserved in advance." The cut-off works through the permanent-resident rule rather than through an exemption you claim: "Permanent resident is a person who has the right to occupy any room in a hotel for at least 30 consecutive days," and "When you have a binding contract with a permanent resident for at least 30 days, no hotel tax is due."

The platform rules changed twice in quick succession, so anything written before mid-2025 is out of date. Informational Bulletin FY 2025-28 records that from 1 July 2025, "hosting platforms for short-term rentals that meet the definition of 're-renter' are subject to Hotel Operators' Occupation Tax" under Public Act 104-0006; Publication 106 adds that from 1 July 2026, "'hotel marketplace facilitator' includes re-renters of hotel rooms and hosting platforms for short-term rentals who otherwise meet the definition of 'hotel marketplace facilitator.'" Public Act 104-0468 then removed the old transaction-count test, leaving a twelve-month gross-receipts remittance threshold in its place. Renting directly puts the registration back on the owner: "You must register for a Hotel Operators' Occupation Tax Account if you are in the business of renting, leasing, or letting rooms to persons for periods of less than 30 consecutive days."

Local hotel taxes are where the collection story gets uneven. IDOR collects the Chicago Municipal Hotel Tax, the Illinois Sports Facilities Tax and the MPEA Hotel Tax, and then says plainly: "IDOR does not collect any local hotel taxes other than the Chicago area taxes listed above. All other local taxes are paid directly to the local taxing authority." Outside the Chicago area, a platform remitting the state tax leaves the local one to be handled by whoever the ordinance names. One sourcing note: 35 ILCS 145/3 itself could not be read on ilga.gov, whose ILCS paths have been restructured, so the statutory rate here is taken from the Department's own published rate database rather than from the section text.

A platform collecting the state tax does not always cover every local tax on the same booking, and it never covers a booking taken directly. If you take reservations off-platform as well, that is where the exposure sits.

Authority: 35 ILCS 145/3; Public Act 104-0006; Public Act 104-0468, tax.illinois.gov

What We Could Not Confirm for Illinois

We could not establish statewide landlord registration from a primary source on August 6, 2026. Rather than fill the gap with a plausible answer, we are telling you it is a gap. The notes below say exactly what was tried and what failed, so you know whether the obstacle was our reach or the state’s.

• landlord registration: Genuinely unverified, not merely unfound. illinoisattorneygeneral.gov serves a JS-only shell to WebFetch and curl; four landlord-tenant paths returned 404. No Illinois state housing or consumer agency page on the question was reachable. Do not upgrade this to local_only without reading an Illinois state agency page or a statute.

Who to Ask in Illinois

The recorder of deeds in the county where the property sits is the office that takes the instrument, and the county's own transfer tax rides on the same document, the one that follows the state exemption automatically under 55 ILCS 5/5-1031. The Illinois Department of Revenue publishes the PTAX-203 Real Estate Transfer Declaration and its instructions, which is where the mortgage line and the exemption codes actually live, and 86 Ill. Adm. Code Part 120 is the rule that decides the gift-versus-exchange question.

If the property sits in a home rule municipality, that city's finance or revenue department is a separate call and a separate ordinance; nothing about the state or county exemption obliges a home rule city to follow. For assessments and the general homestead exemption, the township or county assessor is the office of record, and in Cook County the classification system is its own subject. A practical note for anyone checking the statutes themselves: ilga.gov's section-browser pages return HTTP 500 or bounce to the homepage, while the per-section documents under its /Documents/legislation/ilcs/documents/ path serve correctly. That's the route that works.

Forming the LLC Itself

Nothing about the formation process changes because the LLC will hold rental property, the articles, the registered agent requirement and the annual filing are the same as for any other Illinois LLC. The walkthrough lives in the formation guide rather than being repeated here.

How to start an LLC in Illinois →

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