Indiana short-term rental laws start from a single principle: if you live in the home you rent to guests, no Indiana city or county can zone that use out of existence. Indiana Code 36-1-24 sets the statewide framework and draws a sharp line between owner-occupied rentals, which get strong protection, and investment properties, which local governments can restrict much more heavily. On top of zoning, hosts owe a 7% state sales tax and a county innkeeper’s tax, and many cities require a permit before you list.
Owner-Occupied Rentals Are Protected From Local Bans
If you actually live at the property and rent it to short-term guests, Indiana treats that as a permitted residential use in every zoning district that already allows residential activity. No local government can pass a zoning ordinance disallowing it.1Justia Law. Indiana Code Title 36, Article 1, Chapter 24 – Short Term Rentals
The statute defines a short-term rental as the rental of a single-family home, a unit in a duplex or multi-family building, or a condo or timeshare for less than 30 days at a time through a booking platform. “Owner-occupied” means you live at the property. Meet that definition and the zoning code cannot shut you down, though as covered below, the city can still regulate how you operate.
Investment Properties Face a Harder Path
If you don’t live at the rental, the protections drop away. Your local government can require you to obtain a special exception, special use permit, or zoning variance before operating.1Justia Law. Indiana Code Title 36, Article 1, Chapter 24 – Short Term Rentals That process varies city by city and often includes a public hearing where neighbors can object. Some jurisdictions use this authority to make non-owner-occupied rentals genuinely hard to establish in residential neighborhoods.
Before you buy a house purely as an Airbnb investment, call the local planning department and ask two questions: does this jurisdiction require a variance or special exception for a non-owner-occupied short-term rental, and how often are they granted in residential zones. The answer changes what the property is worth to you.
Cities With Pre-2018 Ordinances Are Exempt
The statute has a large carve-out. It does not apply to any city, town, or county that already had an ordinance regulating, restricting, or prohibiting short-term rentals before January 1, 2018.2Indiana General Assembly. Indiana Code 36-1-24-1 – Applicability Those municipalities can keep enforcing their pre-existing rules and can amend them without becoming subject to Chapter 24. Only a full repeal of the older ordinance brings the city under the state framework.
The practical consequence: the owner-occupied protection is not universal in Indiana. If your city regulated short-term rentals before 2018, local rules control, and they may be stricter than the state statute would allow. Check with your city clerk or planning office before you rely on anything else in this article.
What Cities Can Still Regulate
Even where Chapter 24 applies, local governments keep meaningful authority. They can pass ordinances addressing short-term rentals for five specific health and safety purposes: fire and building safety, sanitation, transportation, traffic control, and pollution control. They can also regulate noise, nuisance activity, property maintenance, and general welfare.3Indiana General Assembly. Indiana Code 36-1-24-10 – Enforcement of Laws That Regulate, Prohibit, or Limit Short Term Rentals
Enforcement must be evenhanded. A city cannot impose fire-safety inspections on short-term rentals while ignoring the same issues in comparable non-rental homes. That equal-enforcement rule is the main check against health and safety codes being used as a backdoor ban.
Local governments can also expressly prohibit short-term rentals used to house sex offenders, operate sober-living homes, manufacture or sell illegal drugs, run adult entertainment businesses, or operate within a conservancy district. Outside those narrow categories, outright bans on owner-occupied rentals are off the table.
Permits and What Cities Can Ask For
Many Indiana municipalities require a permit before you can operate. Indianapolis launched its Short-Term Rental Permit Program in January 2025 and charges a one-time $150 permit fee with no renewal cost.4indy.gov. Landlord and Short-Term Rental Registries Jeffersonville and other cities have adopted similar registration schemes at their own fee levels.
State law limits what a permit application can demand. A municipality’s information request is confined to:
- Your name, street address, mailing address, email, and phone number as the owner
- For a corporation or partnership, the state of incorporation and the names and contact information of principal officers
- If you use a property manager, that person’s name and contact details
Because cities can also require inspections tied to fire and building codes, expect a possible walkthrough before your permit is issued.
State Sales Tax and County Innkeeper’s Tax
Indiana imposes a 7% state sales tax on all short-term rental income.5Indiana Department of Revenue. Sales Tax Information Bulletin 90 It applies to the total amount charged to the guest, including cleaning fees, service fees, and any other charges billed alongside the room rate.6Indiana Department of Revenue. Sales Tax Information Bulletin 41 – Sales Tax Application to Furnishing of Accommodations
Most counties layer an innkeeper’s tax on top. Rates run from 3% in Montgomery County to 10% in Marion County, with most counties at 5%.7Indiana Department of Revenue. County Innkeepers Tax A guest in Hamilton County pays a combined 15%: 7% state plus 8% county.
To collect these taxes you need a Registered Retail Merchant Certificate through the Indiana Department of Revenue’s InBiz portal.8Indiana Department of Revenue. Sales Tax Airbnb and other major platforms collect and remit Indiana sales tax and innkeeper’s tax on your behalf in many cases, but you remain legally responsible for anything the platform does not handle. Late-filed returns face a penalty of up to 20%, with a minimum penalty of $5.7Indiana Department of Revenue. County Innkeepers Tax
The 15-Day Exemption for Primary Residences
Rent your primary residence for fewer than 15 days in a calendar year, take no payments through a marketplace facilitator like Airbnb, and you are exempt from Indiana sales tax and county innkeeper’s tax entirely. The state treats this as a casual transaction, and you don’t have to register as a retail merchant.6Indiana Department of Revenue. Sales Tax Information Bulletin 41 – Sales Tax Application to Furnishing of Accommodations
All four conditions must hold: the property is your primary residence, you rent fewer than 15 days in both the current and preceding calendar year, no payments flow through a marketplace facilitator, and the rental qualifies under the federal 14-day rule in Section 280A(g) of the Internal Revenue Code. Cross any one of those lines and the full tax obligations begin, and you’ll need to register as a retail merchant.
Federal law mirrors part of this. If you use your home as a personal residence and rent it for fewer than 15 days during the year, you don’t report the rental income on your federal return at all, but you also can’t deduct expenses tied to that use.9Office of the Law Revision Counsel. 26 USC 280A – Disallowance of Certain Expenses in Connection With Business Use of Home, Rental of Vacation Homes, Etc Once you rent for 15 days or more, all rental income becomes reportable and ordinary expenses (cleaning, platform fees, supplies, repairs, a proportional share of mortgage interest, property taxes, utilities, and insurance) become deductible. The IRS lays out the details in Publication 527.10Internal Revenue Service. Renting Residential and Vacation Property
HOAs Can Still Ban What the State Allows
Chapter 24 protects you against local governments, not against your neighborhood. If your property sits in a homeowners association, the covenants, conditions, and restrictions can prohibit short-term rentals even when state law says a city can’t. Common restrictive language includes minimum lease terms (a six-month floor effectively kills nightly rentals), “residential use only” clauses read to exclude commercial rental activity, and outright bans on transient occupancy.
HOA restrictions are enforceable as private contracts. Read your governing documents before you list, and look specifically for lease-term minimums, commercial activity prohibitions, and nuisance provisions that could reach guest turnover. Violations can bring fines, legal action, and liens on your property, whatever the city thinks of your rental.
Insurance Usually Requires a Separate Policy
Standard homeowner’s policies typically don’t cover incidents arising from paying guests. Insurers classify short-term rentals as higher risk because unfamiliar occupants are more likely to cause damage and the home may sit empty between bookings. If a guest is injured and your policy excludes commercial activity, you can be personally liable for the full cost.
Dedicated short-term rental insurance closes that gap. These policies extend liability coverage to amenities like pools and hot tubs, cover lost rental income from unexpected events, and address guest-caused property damage. Commercial general liability limits on specialized policies commonly run from $1 million to $2 million in aggregate. Platform host protection programs exist but contain exclusions and put claims control in the platform’s hands, so they don’t replace a standalone policy. Call your carrier before the first guest and confirm in writing that your coverage addresses short-term rental activity.