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Can You Sell a House if You Owe Back Taxes?

by Amber Keefer, studioD

If you don’t pay your local, state or federal taxes, a government taxing authority can file a lien and then sell your home to get paid the money you owe. Even if the taxing authority doesn’t force a sale, selling your property to a buyer on your own requires conveying a clear title. Typically, a buyer won’t purchase a property if there’s any type of lien clouding the title, notes the legal website Nolo.

Delinquent Property Taxes

A local or municipal tax district can place a lien on your home if you owe back property taxes. The lien is filed in the local county clerk’s office, giving the county a claim to your property as security for the unpaid taxes. Once there’s a lien on your house, you won’t be able to sell it until you pay the delinquent taxes. If you can’t pay your tax bill all at once, Realtor.com suggests explaining your situation to the county treasurer. The treasurer may set up an installment plan allowing you to make monthly payments so that you can pay the taxes, penalties and interest you owe to get the lien removed.

Negotiating with Buyers

If you fall behind on your property taxes, you can sell your house before the county places a lien against it and forecloses. When you find a buyer, the taxes must be current at closing. If they aren't, you can’t transfer the title. Since you can pay the delinquent taxes you owe from the proceeds of the sale before the close of escrow, this allows you to pass clear title. You can also negotiate with the buyers for them to pay any back taxes. Although you can make it a condition of sale, you must clearly stipulate in the real estate purchase contract who is responsible for paying the delinquent taxes.

Past-Due State Taxes

If you owe past-due state taxes and your state’s Department of Revenue or Treasury files a lien on your real and personal property, you won’t be able to sell or transfer ownership of your house until you pay your taxes. A state tax lien gives the state a legal right to your property, including the right to sell your house and use the proceeds to satisfy your tax debt, points out Legal Aid of Arkansas. You may be able to make payment arrangements to pay off the delinquent taxes, but the state may still file a lien against your property. Once you pay the debt in full, you can ask the state to withdraw the tax lien.

Not Paying Federal Income Taxes

If you don't pay your federal income taxes, the Internal Revenue Service can place a tax lien on any property you own. You must pay your past-due tax liabilities to get the lien released. As long as you have sufficient equity in the home, you can sell it and pay your tax bill out of the proceeds from the sale at the time of closing. If you don’t have enough equity to pay off the delinquent taxes in full, the IRS might accept a partial payment to release the lien so the sale can go through. In most cases, the IRS won’t file a federal tax lien until you owe $5,000 or more in back taxes, points out E. Martin Davidoff, a New Jersey tax attorney, in an article for Bankrate.

About the Author

Amber Keefer has more than 25 years of experience working in the fields of human services and health care administration. Writing professionally since 1997, she has written articles covering business and finance, health, fitness, parenting and senior living issues for both print and online publications. Keefer holds a B.A. from Bloomsburg University of Pennsylvania and an M.B.A. in health care management from Baker College.

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