Every individual has to deal with some debt during their lifetime. Although most debts are easily payable, some debts can jeopardize your living arrangements and cost you the home you live in. A tax lien is one of such debts levied on an individual or commercial property to compensate for tax payment failures. Different authorities, such as IRS, Homeowners Associations(HOA), and state and federal governments, can levy tax liens on your home. It leads to one important question – Can you sell a house with a tax lien?
Before you get an answer to this question, you must understand what a tax lien is and how it works. To help do that, here is everything you need to know about tax liens and how to deal with them.
What is a tax lien?
When you take out a loan, you are required to put something as collateral or safety. In the same way, when you fail to pay various taxes, such as income taxes or property taxes, the governing authorities have the right to claim your property. The tax lien locks your assets, including your home, until you pay your taxes. Tax liens can be put on various other properties, such as bank accounts, real estate, digital assets, or anything, that can help the authorities to recover the amount of the debt or pending taxes.
What are the types of tax liens?
As mentioned earlier, various authorities can levy tax liens on your property. Based on these authorities, here are different types of tax lien that you should know.
Property tax liens: Property tax liens are placed on your home or other real estates if you don’t pay your property taxes on time. They are levied by your local county or city jurisdiction. You usually get a period of one year to pay off your property taxes. Failure to do so can result in losing your home.
IRS Tax Liens: IRS tax lien is a federal tax lien levied on your property if you don’t pay your taxes to the Internal Revenue Service (IRA).
Homeowners Association Liens: If your home is a part of a homeowners association (HOA), you must pay maintenance charges and other monthly and annual expenses to the HOA. If you fail to pay those expenses, the HOA can have a legal claim on your property and can levy HOA liens.
State Tax Liens: If you fail to pay taxes to your state’s Department of Revenue, your house will be levied with a state tax lien.
Based on all these types, it’s pretty clear that you need to pay your taxes on time, or else you might run the risk of losing your house.
Is it possible to sell a house with a tax lien?
To answer the question, “Can you sell a house with a tax lien?,” many people who have a tax lien on their property often wonder if it is possible to sell their house if it has an existing tax lien. You need to know certain things before you decide to sell your house with a tax lien. You cannot sell your home or transfer the tax liability to the new buyer. But you can sell your house for cash and pay off your taxes from the sale amount. The cash house buyer performs all the essential legal work to pay off your taxes when you sell your house for cash to them. That way, you don’t have to worry about selling your home and the tax liens. Tax liens can be troublesome, especially if you want to sell your house. You can either pay off your taxes or consult a cash house buyer to sell your home and settle the debts.