What a federal tax lien is
A federal tax lien is the IRS's legal claim against everything you own when you owe back taxes. It arises automatically once three things have happened: the IRS assessed the tax, sent you a notice and demand for payment, and you didn't pay in full. From then on it attaches to your house, your other property and anything you acquire later, such as a home you buy or an inheritance.
A lien is not a seizure. The IRS doesn't take your home by filing a lien; it secures its claim so it gets paid when the property is sold or refinanced. Taking property is a levy, which is a separate step with much stricter rules for a home (below).
The lien generally lasts until the debt is paid or the IRS's 10-year collection period, which starts from the date the tax was assessed, runs out.
The Notice of Federal Tax Lien
To protect its place in line against buyers and other creditors, the IRS files a public Notice of Federal Tax Lien (NFTL). For a house, it's filed with the county recorder where the property sits. That's what a title search finds. The IRS generally files one when you owe $10,000 or more, though it can file for less.
Within five business days of filing, the IRS must send you Letter 3172. You then have 30 days (check the date on the letter) to request a Collection Due Process hearing with the IRS Independent Office of Appeals on Form 12153. At the hearing you can propose an installment agreement, an offer in compromise or a withdrawal of the notice, and you can go to Tax Court if you disagree with the result. Miss the window and you can still ask for an "equivalent hearing" within a year, but without Tax Court review.
Two points about where the lien ranks:
- Mortgages recorded before the notice stay ahead of the IRS. A home equity line is different: advances made more than 45 days after the notice is filed rank behind the IRS.
- Your property taxes outrank the IRS. Federal law (26 U.S.C. § 6323(b)(6)) puts local real property taxes and special assessments ahead of a federal tax lien even after the notice is filed. If you're juggling, don't let the county bill slide; that's the debt that can cost you the house fastest. See what happens if you don't pay property taxes.
Can the IRS take your house?
It's rare, and it's hard. Federal law exempts a residence from levy entirely if the amount owed is $5,000 or less. Above that, the IRS can't levy your principal residence without written approval from a federal district judge or magistrate. In practice the IRS usually waits for a sale or refinance, or works out a payment plan.
A state homestead exemption doesn't protect you from a federal tax lien. And if you own the home with a spouse who doesn't owe the tax, the Supreme Court has held that the lien still reaches the debtor spouse's share, even in states where tenancy by the entirety shields it from ordinary creditors (United States v. Craft, 2002). A court-ordered sale of the whole home is possible, but the non-liable spouse must be paid for their interest (United States v. Rodgers, 1983).
Selling a house with a federal tax lien
You can sell. The title company will find the lien, ask the IRS for a payoff and pay it from your proceeds at closing.
- If the sale covers the debt: the IRS is paid in full from escrow and must release the lien within 30 days.
- If it doesn't: apply for a certificate of discharge (Form 14135, explained in IRS Publication 783) at least 45 days before closing. Discharge removes the lien from that one property, while the debt itself remains. The IRS usually agrees if it's paid the value of its interest in the property, or if senior debts like the mortgage are larger than the sale price so its interest is worth nothing. You'll need an appraisal by a disinterested third party.
Refinancing with a federal tax lien
Lenders won't make a new loan that ranks behind an IRS lien. The solution is a certificate of subordination (Form 14134, IRS Publication 784): the lien stays on the house, but the IRS agrees to let the new lender go first. Apply at least 45 days before settlement. The IRS agrees either if it's paid an amount equal to the interest it's giving up, or if the refinance will help it collect more, for example because a lower payment frees up money for an installment agreement. If you're doing a cash-out refinance to pay the tax in full, you don't need subordination; the lien will simply be released.
Four ways to get the lien off your home
| Option | What it does | When to use it |
|---|---|---|
| Release | Ends the lien on everything | You've paid in full, or the debt is no longer collectible. The IRS must release within 30 days |
| Discharge (Form 14135) | Removes the lien from one property | Selling the house when you can't pay the whole debt |
| Subordination (Form 14134) | Lets a lender go ahead of the IRS | Refinancing |
| Withdrawal (Form 12277) | Removes the public notice as if it had never been filed | After release, or while paying by direct debit installment agreement |
Withdrawal is the one most people don't know about. Under the IRS's Fresh Start rules, you can ask for the notice to be withdrawn if you owe $25,000 or less, are paying through a direct debit installment agreement that will pay it off within 60 months, have made three consecutive payments and are current on your filings. You can also ask for withdrawal after the lien has been released, which makes it easier for future lenders and buyers. If someone with your name has a lien that's showing up on your property, ask for a certificate of nonattachment.
For a payoff amount or to confirm a release, call the IRS Centralized Lien Operation at 800-913-6050. The Taxpayer Advocate Service (877-777-4778) can help if you're stuck.
Does a tax lien show on your credit report?
Not anymore. The three credit bureaus removed tax liens from consumer credit reports in 2017 and 2018. But a lien is still a public record, so title companies, mortgage underwriters and anyone searching the county records will see it. See how to check for liens on a property.
State tax liens
Most states can file their own lien for unpaid state income or sales tax, usually with the county recorder. The rules are similar but separate. California's Franchise Tax Board, for example, keeps a recorded lien in effect for at least 10 years and records a release within 40 days after you pay in full.
Both are different from a property tax lien, which attaches to the house itself, outranks the IRS and can lead to a tax lien certificate or tax deed sale. Our tax lien vs. tax deed guide explains that side.
Sources
26 U.S.C. §§ 6320, 6321, 6322, 6323, 6325, 6330, 6334 and 6502; IRS "Understanding a Federal Tax Lien"; IRS Publications 594, 783, 784 and 1450; IRS Collection Due Process FAQs and Internal Revenue Manual 5.12.2; the Taxpayer Advocate Service; United States v. Craft, 535 U.S. 274 (2002) and United States v. Rodgers, 461 U.S. 677 (1983); the CFPB and Experian on credit reporting; and the California Franchise Tax Board. This is general information, not tax or legal advice.