Can I Sell My House if I Owe Back Taxes?

Summary:

It is possible to sell a house even if you owe back taxes on it, but it will depend on the specific circumstances of your situation. If you are behind on your property taxes, you will need to pay off the amount you owe before the sale can be completed. If you are unable to pay the back taxes, it may be difficult to find a buyer who is willing to purchase the property. In some cases, the government may place a tax lien on the property, which would need to be paid off before the sale could be completed. It is important to consult with a legal professional who can help you understand your options and navigate the process of selling a house with back taxes.

Falling behind on taxes of any kind can have serious financial consequences. In some cases, it can result in a lien against your home. When this happens, you may wonder what this means if you want to sell your house. While you are allowed to sell your house if you owe back taxes, the sale may be slower and much more complicated.

What is a tax lien?

A tax lien is a legal claim by the government against your property when tax debt is neglected or unpaid. While this does not mean that the IRS has taken ownership of your property, it does ensure that they will be paid what’s owed if you do sell your home. However, ignoring the property lien can lead to a seizure of your home by the IRS.

How do tax liens affect my home sale?

Even though you can still sell your home with a lien on it, it does make the sale more complicated. Some Americans sell their home specifically to pay off their back taxes as doing so would allow the IRS to discharge their tax debt. However, some taxpayers with a lien on their property might be on a tight time limit before any further action is taken by the IRS. When this happens, the homeowner may be pressured to sell at a lower asking price in order to sell quickly.

For example, let’s say your house is worth $500,000 and you owe $400,000 on your mortgage. Now let’s assume you have a tax debt of $50,000 and you are pressured to accept an offer on your home for $425,000 to avoid a seizure of your home by the IRS. Not only would you be accepting $75,000 less than the value of your home, but you would still owe $25,000 on your mortgage since liens are first in line for repayment.

In this case, you will need to find another method of settling your mortgage balance, which can include tapping into your savings or retirement funds. On the other hand, if the IRS had a lien placed against your home, it may be fair to assume that they have also levied your savings or retirement funds.

Tax Relief for Homeowners with Back Taxes

Can you sell your house if you owe back taxes? The short answer to this question is yes. Using the sale proceeds, you can eliminate any tax debt and liens against your property. However, it is important to first determine if the value of your home, as well as your equity, will allow you to make enough profit to accomplish this. If you do not have enough equity in your home to cover your tax debt, it may not be beneficial to sell your home. It goes without saying that the best thing to do is to always ensure that you remain compliant with all tax laws to avoid a situation like this. Dealing with the IRS can be a stressful, intimidating, and long process. Seeking help from a reputable tax relief company can not only ease stress but can also potentially result in savings while settling your tax debt.

Key takeaways

  • If you owe back taxes on your home, you will need to pay off the amount you owe before the sale can be completed.
  • It may be difficult to find a buyer who is willing to purchase a property that has back taxes owed on it.
  • The government may place a lien on the property if back taxes are owed, which would need to be paid off before the sale could be completed.
  • It is important to consult with a legal professional to understand your options and navigate the process of selling a home with back taxes.
  • In some cases, the buyer may be willing to pay the back taxes as part of the sale, but this will depend on the specific terms of the sale.
View Article Sources
  1. IRS – What If There Is a Federal Tax Lien On My Home
  2. Buying a House with a Tax Lien? – SuperMoney
  3. How To Remove an IRS Tax Lien – SuperMoney