Indiana offers diverse attractions, creating a growing market for short-term rentals, from the bustling streets of Indianapolis to the college town atmosphere of Bloomington. The Hoosier State's combination of major sports events, academic institutions, and cultural sites makes it an appealing destination for travelers seeking alternatives to traditional hotel accommodations.
Indiana is noteworthy for short-term rental operators due to its unique legislative approach. The state has minimal direct regulation and has established important protections for property owners through state law that prevents cities from banning vacation rentals.
This guide covers short-term rental laws in Indiana, from the state's protective legislation to specific requirements in major cities. For more information on local regulations and operating an STR business, connect with Checkmate Rentals.
Understanding Indiana’s Short-Term Rental Laws
Indiana's short-term rental regulation balances state protection and local control. Unlike many states with a hands-off approach or comprehensive statewide regulations, Indiana has established meaningful baseline protections for operators through state legislation while allowing substantial local regulatory authority.
Indiana's regulatory framework prevents municipalities from banning short-term rentals. This legislation ensures that cities cannot prohibit vacation rentals entirely, though they retain the authority to regulate them through permitting systems, safety requirements, and operational standards.
This hybrid approach creates a better environment for short-term rental investors compared to states where municipalities can eliminate vacation rentals through prohibitive zoning or licensing. It results in significant regulation variation across Indiana communities, as cities and counties develop their own requirements within state law constraints.
Since House Bill 1035 passed, the regulatory landscape has evolved, with many Indiana communities developing or refining short-term rental regulations. These local rules address housing availability, neighborhood character, and community impact concerns while remaining within state legislation limits.
This regulatory structure provides baseline protections for property owners and investors while requiring attention to local requirements. Understanding both state-level protections and specific local regulations for your property's location is essential for legal operation and long-term success in Indiana's short-term rental market.
Definition of a Short-Term Rental
While definitions vary across Indiana municipalities, the state shares a common understanding of short-term rentals. This definition forms the foundation for state-level protections and local regulations.
In Indiana, a short-term rental is defined as a residential unit rented for less than 30 consecutive days. This timeframe distinguishes short-term or vacation rentals from longer-term leases, which fall under different regulatory frameworks.
In Indiana, short-term rentals include:
- Single-family homes
- Condos and apartments
- Rooms within a home
- Duplexes and multi-family units
- Accessory dwelling units (in certain jurisdictions)
Indianapolis, Indiana's capital and largest city, defines short-term rentals as residential units rented for less than 30 consecutive days, aligning with the state understanding. Other municipalities may have slight variations, but the less-than-30-days threshold is consistent statewide.
Traditional accommodations like hotels, motels, and bed and breakfasts fall under separate regulatory frameworks with specific licensing and operational requirements. The distinction between a bed and breakfast and a short-term rental hinges on factors like food service, management presence, and the number of units.
Some Indiana municipalities may refine these definitions with further criteria or classifications based on:
- Owner-occupied vs non-owner-occupied properties
- Primary residence vs. investment properties
- Rental frequency (occasional vs. full-time)
- Whole-house rentals vs. room rentals
It is crucial to understand the specific definition in your jurisdiction, as it determines the regulations governing your property and the requirements for legal operation. This requires consultation with local planning departments or municipal authorities to clarify your property’s classification under local ordinances.
Starting a Short-Term Rental Business in Indiana
Launching a short-term rental business in Indiana requires navigating state protections and local regulations. Success depends on thorough research and adherence to rules, which vary across communities despite the state's prohibition on outright bans.
1. Research local regulations
Before purchasing or converting a property to a short-term rental, investigate the specific regulations in your city and county. Indiana's statewide protection prevents complete bans, but local governments can regulate short-term rentals.
This preliminary research is important because different approaches to short-term rental oversight have been implemented by Indiana communities:
- Indianapolis has established a Short-Term Rental Permit Program.
- Other cities may incorporate short-term rental regulations into existing zoning or business licensing frameworks.
- Some communities have minimal specific regulations while enforcing general property and nuisance ordinances.
Start your research with your city and county’s local government website. Focus on planning departments, zoning offices, and business licensing divisions. Look for ordinances addressing short-term or vacation rentals in municipal codes related to housing, business licensing, or zoning.
2. Obtain Necessary Licenses and Permits
Many Indiana cities require specific permits or business licenses for short-term rentals. These local authorizations are essential for legal compliance and typically involve:
- Application forms with detailed property information.
- Proof of ownership and property details.
- Floor plans or property layouts
- Contact information for owners and local representatives.
- Permit fees
Indianapolis requires a Short-Term Rental Permit with a $150 initial fee. Other Indiana cities have their own permitting systems or incorporate short-term rental oversight into existing business licensing.
Besides local permits, you need to register with the Indiana Department of Revenue for tax purposes. Application processes vary by location, with some cities offering online systems and others requiring in-person submissions. Processing times range from a few days to several weeks, so prepare accordingly.
3. Understand Zoning Restrictions
Indiana law prevents cities from banning short-term rentals, but municipalities can regulate them through zoning ordinances. Many cities restrict short-term rentals to specific zoning districts or impose operational requirements.
Before purchasing or converting a property, verify that short-term rentals are permitted in your zone and if there are additional criteria like parking, occupancy, or property type restrictions. This information is available through city planning departments or zoning offices.
Indianapolis requires short-term rentals to be in legally built units and comply with local zoning and building codes. Other cities have more specific restrictions limiting them to certain districts or imposing density limitations in residential areas.
4. Comply with Safety Standards
Safety requirements for Indiana short-term rentals typically include:
- Working smoke detectors and carbon monoxide alarms
- Fire extinguishers
- Emergency exit plans
- Compliance with building codes
- Maximum occupancy limits
- Proper electrical and plumbing systems.
Many jurisdictions require initial safety inspections for the permit application process, and some mandate periodic re-inspections for compliance. These standards meet regulatory requirements and help protect guests while minimizing liability for property owners.
In addition to local requirements, prudent operators implement recommended safety measures like exterior lighting, secure entry systems, and first aid kits. These precautions create a safer environment and can distinguish your property in a competitive market.
5. Register for Tax Collection
In Indiana, short-term rental operators have several tax obligations:
- State Sales Tax: Indiana's 7% state sales tax applies to short-term accommodations.
- County Innkeeper's Tax: This tax varies from 2% to 10% depending on the county.
- Marion County (Indianapolis): 10%
- Other counties: Rates vary and should be confirmed with local tax authorities.
To collect these taxes, first register with the Indiana Department of Revenue for state sales tax and possibly your local tax authority for county innkeeper's tax. While Airbnb and Vrbo collect and remit some in certain Indiana areas, operators are responsible for fulfilling all obligations.
Clear record-keeping is essential for accurate tax reporting, including documentation of rental income, occupancy periods, and collected taxes. Many professional hosts use software to track obligations and ensure compliance with local requirements.
6. Secure Insurance
Standard homeowners insurance typically doesn't cover commercial short-term rental activities, creating a potential coverage gap for unprepared operators. Adequate insurance for Indiana rentals usually includes:
- Property coverage for the building and contents.
- Liability protection for guest injuries
- Business interruption coverage
- Coverage for theft or damage caused by guests
While appropriate insurance does not always have to be mandated, it protects your investment and provides essential liability coverage. Some Indiana municipalities require proof as part of the permit application process, typically with minimum coverage thresholds.
Many major insurers now offer specialized short-term rental policies or endorsements to standard homeowners policies. Platforms like Airbnb and Vrbo also provide limited host protection programs, but these have significant limitations and exclusions, making dedicated insurance advisable.
7. Establish Local Management
Some Indiana cities require short-term rental operators to designate a local contact person for prompt issue response. This is important for out-of-state owners who cannot address emergencies or complaints.
The local contact must:
- Be reachable by phone.
- Respond to issues within a set timeframe.
- Access to the property.
- Be empowered to address problems.
For non-local owners, this requirement necessitates hiring a professional property manager or establishing a relationship with a reliable local contact. The contact information must be provided to the permitting authority and, in some cases, to neighboring properties or guests.
Licensing Requirements
Indiana lacks a statewide licensing system for short-term rentals. This allows cities and counties to set their own permitting and registration requirements within the limitations of House Bill 1035. This decentralized approach results in varied processes across jurisdictions, though state law places limits on local systems.
At the state level, there’s no specific short-term rental license or registration requirement beyond standard business and tax registrations. Regulation occurs mostly at the local level, with the limitation that municipalities cannot prohibit short-term rentals.
Local licensing typically involves:
- Short-Term Rental Permits/Licenses: Specialized permits for vacation rental operations with specific requirements.
- Business Licenses: General authorization to conduct business within the municipality, which may be required in addition to or instead of specific short-term rental permits.
- Zoning Approvals: Certifications that the property is in a zone where short-term rentals are permitted, sometimes requiring special use permits.
Notable local licensing requirements include:
Indianapolis
- Requires a Short-Term Rental Permit
- Initial fee of $150.
- Annual renewal required. The fee may be waived if the permit hasn’t been revoked.
- Must provide proof of ownership, floor plan, contact information, and a business permit.
- Property must comply with local zoning and building codes.
Bloomington
- A local permit is required with an annual fee, reported as $100 in older sources. Current fees should be confirmed.
- Must comply with zoning laws dictating short-term rental locations.
- Subject to safety standards and guest management.
Other Indiana Cities
- Fort Wayne, Evansville, and other cities have specific permitting requirements or incorporate short-term rental oversight into existing business licensing frameworks.
- Verify requirements with local authorities as regulations change.
House Bill 1035 limits local licensing by capping permit fees at $150 for initial permits. This state-level constraint prevents municipalities from implementing costly systems that would effectively ban short-term rentals through excessive fees.
Application processes involve submitting detailed information about the property and owner, including:
- Property address and specifications
- Owner identification and contact information
- Floor plans and property details
- Local contact information
- Proof of insurance (if needed)
- Safety standards compliance certification
Local licenses and permits typically have defined validity periods—usually one year, after which renewal is required. The process involves confirming compliance with regulations, updating property information if needed, and potentially paying renewal fees; some jurisdictions, like Indianapolis, may waive them for permits in good standing.
License Renewals
Maintaining valid licenses and permits for Indiana short-term rentals requires attention to local renewal processes and deadlines. Most jurisdictions require annual permit renewal, but the timing, procedures, and fees differ.
The renewal process involves:
- Submitting a renewal application before the deadline
- Updating property and contact information as necessary.
- Confirming adherence to local regulations.
- In some cases, undergoing re-inspection to verify safety compliance.
In Indianapolis, short-term rental permits require annual renewal. However, the renewal fee may be waived if the permit hasn’t been revoked. This approach encourages ongoing compliance by reducing costs for responsible operators while maintaining oversight through the renewal process.
Other Indiana cities have their own renewal requirements and fees. In Bloomington, permits typically require annual renewal with associated fees, though current details should be confirmed with local authorities.
Unlike some states that coordinate renewal deadlines, Indiana's localized system means each permit follows its own timeline. The timeline is based on the initial approval date or a standardized calendar for the jurisdiction. This creates individualized deadlines that vary from one property to another, even within the same city.
Property owners and managers must track renewal deadlines, as operating with an expired license can result in penalties. Many jurisdictions impose fines for continued operation without valid licenses, and some implement additional penalties for repeat violations, including permit revocation or disqualification from future eligibility.
Most local authorities send renewal notices as a courtesy, but the responsibility for timely renewal rests with the property owner. Changes in contact information or mail delivery issues could result in missed notifications, making proactive tracking of deadlines important.
The renewal process allows local authorities to verify continued compliance and implement any regulatory changes since the initial license was issued. It’s crucial to keep up with evolving short-term rental regulations in your jurisdiction.
Required Documents
In Indiana, operating a short-term rental requires maintaining documents to demonstrate compliance with local regulations. These materials support the initial license application, facilitate ongoing operations, and may be requested during inspections or complaints.
Essential documentation includes:
- You need to provide proof of ownership, like a deed or property tax statement. This establishes your legal right to operate a short-term rental at the location and is important in jurisdictions with owner-occupancy requirements or restrictions on non-owner rentals.
- Detailed property information including the address and floor plans of the rental unit is used by many jurisdictions to determine maximum occupancy limits and ensure the property meets basic requirements for guest accommodations.
- Owner and operator information, including government-issued IDs and contact details, ensures authorities can contact the responsible party and verify operators meet residency requirements for specific permits.
- Local contact information for property management or emergencies. This representative must be available to address issues promptly, especially for absentee owners who cannot respond to urgent situations.
- Proof of insurance coverage for short-term rental activities is essential for safeguarding your investment. While not all Indiana municipalities require specific documentation, having appropriate coverage is important.
- Tax identification numbers like EIN or SSN for tax reporting, along with state and local tax registration information, facilitate accurate collection and reporting to authorities.
- Compliance certifications demonstrate adherence to safety and building codes. These documents verify that the property meets established standards for guest safety and neighborhood compatibility.
Besides these regulatory documents, responsible operators maintain additional records to support their business operations, including:
- Guest agreements and house rules
- Cleaning and maintenance records
- Tax payment records and receipts
- Communications with local authorities or neighbors.
Organizing materials in physical and digital formats ensures quick access. Many professional hosts create comprehensive digital filing systems with backup copies of critical documents, safeguarding against loss and enabling remote access.
In Indianapolis, short-term rental operators must maintain these documents, post owner contact information in the rental property, and allow police access to contact information upon request. These requirements ensure accountability and facilitate a quick response to any issues.
Taxes for Short-Term Rentals
Indiana imposes significant tax obligations on short-term rental operators at both the state and county levels. It is essential for the legal operation and financial management of vacation properties to understand and fulfill these responsibilities.
State Sales Tax
Indiana requires short-term rental operators to collect and remit a 7% state sales tax on accommodations rented for less than 30 days. This tax applies to the entire rental amount, including cleaning fees and other charges.
To collect this tax, register with the Indiana Department of Revenue and obtain a Registered Retail Merchant Certificate (RRMC). This registration allows you to legally collect taxes from guests and remit them to the state, typically monthly or quarterly based on your rental volume.
County Innkeeper's Tax
Indiana counties can impose an Innkeeper's Tax (lodging or hotel tax) on short-term accommodations. The tax varies considerably by county:
- Marion County (Indianapolis): 10%
- Other counties: Rates range from 2% to 10%
A short-term rental in Indianapolis faces a total tax rate of 17% on rental income, consisting of a 7% state sales tax and a 10% Marion County innkeeper's tax.
Verify your property's innkeeper's tax rate with the local county tax authority, as rates can change and vary significantly between neighboring counties.
Tax Collection by Platforms
Major booking platforms like Airbnb and Vrbo collect and remit some taxes in certain Indiana jurisdictions. However, these arrangements don't cover all applicable taxes or may apply only to direct bookings. Operators are responsible for ensuring all tax obligations are met.
When platforms collect taxes, they typically focus on state sales tax and possibly county innkeeper's taxes in major jurisdictions like Marion County. Verify which taxes your booking platforms collect and which remain your responsibility.
Income Taxes
Rental income from short-term rentals in Indiana is subject to state and federal income taxes. The flat state tax rate (3.23%) in Indiana applies to rental income, while federal rates depend on your overall income and filing status.
Short-term rental operators can reduce their tax burden through various business-related deductions, including:
- Property depreciation
- Mortgage interest
- Property taxes
- Utilities and internet
- Cleaning and maintenance expenses
- Furnishings and supplies
- Platform commission fees
- Marketing expenses
- Professional service fees
Property Tax Implications
Operating a short-term rental in Indiana may have property tax implications, though impacts vary by jurisdiction. Some counties may classify properties used primarily as rentals differently than owner-occupied homes, resulting in different assessment methodologies or tax rates.
Proper record-keeping is essential for maximizing deductions and compliance with tax regulations. Many professional hosts work with accountants specializing in short-term rentals to enhance their tax strategy and ensure accurate reporting.
Statewide Rules
Unlike most states that take a hands-off approach or implement comprehensive regulations, Indiana has established a unique middle ground through House Bill 1035. This legislation provides protections for short-term rental operators while allowing local governments to implement sensible regulations.
Indiana's approach prevents municipalities from banning short-term rentals. This state-level protection ensures cities cannot prohibit vacation rentals entirely, providing essential rights for property owners.
House Bill 1035 allows local governments to oversee short-term rentals:
- Permitting systems (initial fees capped at $150)
- Safety and building code standards
- Zoning regulations that don't fully prohibit
- Operational standards addressing community impacts
This balanced approach reflects Indiana's effort to protect property rights while recognizing local concerns about housing availability, neighborhood character, and community impacts.
Additional state-level frameworks for short-term rentals include:
- General Business Regulations: If operating as a formal business entity rather than as an individual, short-term rental operators must comply with standard registration requirements.
- Building and Safety Codes: State codes establish minimum standards for all residential properties, regardless of their use, and are not specific to vacation rentals.
- Tax Requirements: State law establishes a 7% sales tax for short-term rentals, creating a consistent obligation regardless of location.
This state-level approach creates a more favorable environment for property owners and investors than states where municipalities can implement outright bans, while still requiring attention to local regulations. The protection against complete prohibition provides important investment security, as operational requirements differ across communities.
Indiana's approach through House Bill 1035 seems stable, but property owners should monitor potential legislative changes that may affect the balance between state protection and local regulatory authority.
Short-Term Rental Regulations by City
Indiana's major cities have distinct regulatory approaches to short-term rentals under House Bill 1035. Understanding these city-specific regulations is important for successful operation in different markets statewide.
1. Indianapolis
Indianapolis, as Indiana's capital and largest city, has implemented one of the state's most structured regulatory frameworks for short-term rentals, with a specific permitting system and operational requirements.
Overview: Indianapolis defines short-term rentals as residential units rented for less than 30 consecutive days and requires a specific permit for legal operation. The city's approach balances property rights with neighborhood preservation through reasonable regulations.
Key Regulations:
- Requires a city permit with a $150 fee.
- Annual renewal (with potential fee waiver if the permit has not been revoked)
- Application must include proof of ownership, floor plan, contact information, and a state business permit.
- Properties must comply with local zoning regulations and building codes.
- Must be in legally constructed dwelling units.
- Requirement for a two-night stay
- The rental property must display owner contact information.
- Police must access contact information when requested.
- Subject to routine inspections
Indianapolis enforces these regulations through its permitting system and complaint response, with potential penalties for non-compliance. The city's approach addresses the growing short-term rental market and neighborhood concerns.
Tax Rates:
- 7% state sales tax
- 10% innkeeper's tax
- Total: 17% combined tax rate
2. Fort Wayne
Fort Wayne, Indiana's second-largest city, is evolving its approach to short-term rental regulation, with discussions around registration and zoning requirements.
Overview: Fort Wayne is developing regulations for short-term rentals that may include registration and zoning requirements, although complete current details were not provided. The framework continues to evolve within the parameters of House Bill 1035.
Key Regulations:
- Involve a registration or permitting process, with details to be verified with local authorities.
- Zoning regulations restrict operations to specific areas.
- Other developing regulations include safety standards, occupancy limits, and operational guidelines.
Confirm with city officials Fort Wayne’s enforcement approach and requirements. Regulations in Indiana communities may change with the growing short-term rental market.
Tax Rates:
- 7% Indiana sales tax
- Allen County innkeeper's tax with local authorities.
3. Evansville
Evansville, a major city in southwestern Indiana, incorporates short-term rentals into its business and safety regulations.
Overview: While the research did not providedetailed specifics, Evansville requires compliance with general business regulations and safety standards rather than a specialized short-term rental permit system.
Key Regulations:
- You need a general business license to operate.
- Zoning compliance is required to ensure short-term rentals operate within designated residential or commercial zones.
- General safety and nuisance ordinances apply to short-term rentals.
Confirm the specific requirements and enforcement mechanisms in Evansville with city officials. The city takes a less specialized approach than Indianapolis, relying more on existing regulatory frameworks to oversee short-term rentals.
Tax Rates:
- 7% Indiana state sales tax
- Vanderburgh County innkeeper's tax with local authorities.
4. Bloomington
Bloomington, home to Indiana University, has established short-term rental regulations that reflect its character as a college town with significant tourism from academic and sporting events.
Bloomington requires a local permit and annual fees for short-term rentals to manage vacation rentals.
Key Regulations:
- A local permit is required with an annual fee, reported as $100 in older sources. Verify current fees.
- Zoning laws dictate where short-term rentals can operate, limiting certain residential areas.
- Compliance with safety standards is required.
- Guidelines on guest management and neighborhood impact apply.
Bloomington enforces these regulations through its permitting system and community feedback. The city's approach reflects its character as a university town with high demand for short-term accommodations during events.
Tax Rates:
- 7% sales tax
- Monroe County innkeeper's tax with local sources.
Bottom Line
Operating a short-term rental in Indiana requires navigating the state's regulatory landscape. House Bill 1035 protects against outright bans, but property owners must comply with local requirements.
Before investing in a short-term rental property in Indiana:
- Research thoroughly. Understand the state-level protections and local regulations for your property's location. This should be location-specific and include consultation with city planning departments, business licensing offices, and legal advisors familiar with the area.
- Consider location carefully. Local regulations may make some areas significantly more favorable for short-term rental investments than others, even within the same region. These differences can impact your property's operational viability and return on investment.
- Budget for compliance costs. Include permit fees (capped at $150 for initial permits by state law), tax obligations, insurance requirements, and ongoing regulatory compliance expenses. These costs vary by jurisdiction and should be included in your financial planning.
- Implement professional management practices. Regardless of local requirements, standards for guest screening, property maintenance, noise management, and neighbor relations help prevent problems and support your business’s sustainability.
- Stay informed about Indiana's evolving short-term rental regulations at the local level. Keep up with regulatory changes by monitoring government communications and participating in host associations.
The short-term rental landscape in Indiana presents opportunities and challenges. The state's protection against outright bans provides security for property owners, but the varied local regulations require careful compliance. By understanding and adhering to both state and local requirements, operators can build successful businesses that contribute to Indiana's tourism economy while maintaining good relationships with local communities and regulatory authorities.
