The Short Answer
A tax lien is the county's legal claim on your house for unpaid property taxes. A tax deed is the document that transfers the house itself to a new owner after a tax sale. Between the two sits the step that differs most from state to state: whether the county sells the lien to an investor (a tax lien certificate) or sells the property (a tax deed sale).
If you're behind on taxes, or you inherited a house that is, the system your state uses tells you three things: who you'll owe money to, how fast that debt grows, and how long you have to pay it off before the house is gone. The general timeline from missed payment to foreclosure is in what happens if you don't pay property taxes.
What a Property Tax Lien Is
You don't have to do anything for a property tax lien to exist. It attaches automatically by law, usually as of January 1 of the tax year. Florida's statute is typical: property taxes are a first lien, "superior to all other liens," from January 1 of the year they're levied. Texas law also attaches a tax lien every January 1.
That priority matters because a property can carry several kinds of liens at once:
- Mortgage: the lender's lien, recorded when you bought or refinanced.
- Mechanic's lien: filed by a contractor or supplier who wasn't paid for work on the house.
- Judgment lien: a creditor who won a lawsuit against you records it against your real estate.
- IRS tax lien: for unpaid federal taxes.
Normally the first lien recorded gets paid first. Property tax liens jump the line. They generally outrank even an older mortgage, and federal law (26 U.S.C. 6323(b)(6)) lets local property tax liens that have this kind of priority under state law come ahead of an IRS lien too. That is why mortgage servicers pay delinquent taxes themselves rather than risk a tax sale.
The Three Systems: Lien, Deed and Redeemable Deed
Tax lien certificate states
The county auctions the lien, not the house. The winning bidder pays your overdue taxes and gets a tax certificate (also called a tax sale certificate or certificate of purchase). You now owe that investor the taxes plus interest. Bidders usually compete by offering to accept a lower interest rate, so the rate you pay depends on the auction. If you don't pay within the redemption period, the certificate holder can apply for a deed or foreclose.
Tax deed states
The county, after a longer wait, sells the property itself. The buyer gets a tax deed. In most of these states your chance to pay off the debt ends shortly before the sale.
Redeemable deed (hybrid) states
The house is sold at auction, but you keep a right to buy it back for a set period afterward by repaying the buyer what they paid plus a fixed premium. Texas and Georgia work this way.
Representative States by System
These are a sample, not a complete list. The figures come from each state's statutes or official county guidance; local procedures add fees and notice steps on top.
| State | System | Rate or premium you pay | How long you have |
|---|---|---|---|
| Florida | Certificate, then tax deed | Bid down from 18% a year; 5% minimum charge | Until the tax deed buyer pays the clerk in full |
| Arizona | Lien certificate | Bid down from 16% a year | Holder can pursue foreclosure after 3 years; you can redeem until the treasurer's deed is delivered |
| Illinois | Lien certificate | Penalty bid of up to 9%, which grows with each six-month period you wait | Generally 2.5 years for homes; 1 year for vacant or commercial land |
| New Jersey | Lien certificate | Bid down from 18%, plus a 2%, 4% or 6% redemption penalty based on certificate size | Holder can file foreclosure after 2 years; you can redeem until it's final |
| Iowa | Lien certificate | Fixed 2% per month | Holder can send a 90-day expiration notice after 1 year and 9 months |
| Colorado | Lien certificate | 9 points above the Federal Reserve discount rate set each September | Holder can apply for a deed after 3 years |
| Texas | Redeemable deed | 25% premium in year one, 50% in year two | 2 years after the deed is recorded for a homestead or farm land; 180 days for other property |
| Georgia | Redeemable deed | 20% premium for the first year, plus 10% for each year after | 12 months after the sale, then until the buyer forecloses the right by notice |
| California | Tax deed | Penalties and redemption fees to the county | County gets the power to sell after 5 years in default (3 for commercial property) |
| Michigan | Tax deed (county foreclosure) | Interest and fees to the county treasurer | Redemption generally ends March 31 after the foreclosure judgment |
Illinois and Cook County in particular have changed their rules several times since 2022, and Colorado counties have changed how they handle treasurer's deeds since the Supreme Court case covered below. Ask your county treasurer for the rules that apply to your sale year.
Florida in Detail: How a Tax Certificate Works
Florida is the state people usually mean when they search "tax certificate." Here is the sequence under Chapter 197 of the Florida Statutes:
- April 1: Unpaid taxes become delinquent (or 60 days after the bill was mailed, if later). A 3% minimum charge applies.
- By June 1: The tax collector advertises for three weeks and holds the tax certificate sale, usually online.
- At the sale: Bidders compete on interest rate, starting at 18% and bidding down in quarter-point steps. The lowest rate wins. Certificates nobody buys go to the county at 18%.
- Two years later: Starting two years after April 1 of the year the certificate was issued, the holder can apply for a tax deed.
- Tax deed sale: The clerk of court auctions the property. You can redeem right up until the winning bidder pays the clerk in full.
- Seven years: If no one applies for a tax deed within seven years, the certificate expires and is canceled.
What redeeming costs
You pay the certificate's face amount plus the bid interest rate, with one twist: Florida charges a 5% mandatory minimum on the face value, unless the winning bid was 0%. Say your unpaid bill became a $3,200 certificate:
- Bought at 18%, redeemed one year later: about $576 in interest, so roughly $3,776 plus the collector's fees.
- Bought at 3%, redeemed one year later: 3% would be $96, but the 5% minimum applies, so you owe $160 in interest.
If a tax deed application has been filed, the payoff also includes the applicant's costs, any later years' certificates and the clerk's fees, so the number climbs quickly. Get the exact figure from the county tax collector (before an application) or the clerk of court (after one).
The homestead protection
If the property is assessed as homestead, the opening bid at the tax deed sale must include an extra one-half of the latest assessed value (Fla. Stat. 197.502(6)(c)). On a homestead assessed at $200,000, that adds $100,000 to the minimum bid. If the house sells, that amount is treated as surplus for the former owner, after any other recorded liens are paid. For more on how homestead status works, see the Florida homestead exemption guide.
Tyler v. Hennepin County: The Surplus Belongs to You
Geraldine Tyler owed Hennepin County, Minnesota about $15,000 in property taxes, interest and penalties on her condo. The county took the condo, sold it for $40,000 and kept all of it. In May 2023 the U.S. Supreme Court ruled 9-0 that keeping the extra $25,000 was an unconstitutional taking. As Chief Justice Roberts put it, the taxpayer must pay what is owed, "but no more."
The case didn't stop tax sales. Counties can still sell a house to collect the debt. What they can't do is keep the equity above what's owed. Michigan's Supreme Court had reached a similar result in 2020 in Rafaeli v. Oakland County, and since 2023 states such as New Jersey have rewritten their laws so former owners can claim the surplus.
The catch is that in most states you have to claim it, on time:
- Florida: The clerk mails a notice of surplus funds. Other claimants have 120 days to file; unclaimed money is presumed to belong to the titleholder of record and eventually goes to the state's unclaimed property program.
- Texas: A petition for excess proceeds must be filed in the court that ordered the sale before the second anniversary of the sale. Heirs of a former owner can claim.
- Michigan: Former owners must file Form 5743 with the county treasurer by the July 1 after the foreclosure takes effect, then file a motion in circuit court later.
If a parent's house was sold for taxes, check the clerk or treasurer's surplus list even if years have passed. Heirs often don't know money is waiting.
What to Do If You're Behind
- Get the exact payoff in writing. Call the county tax collector or treasurer, not the assessor, and ask for the redemption amount good through a specific date. If a certificate was sold, the payoff still usually goes through the county, not directly to the investor.
- Ask about a payment plan. Many counties offer installment agreements on delinquent taxes. Texas, for example, lets homeowners set up plans with the tax office.
- Check for deferral if you're 65 or older or disabled. In Texas, filing a deferral affidavit stops a tax suit or sale on your homestead; the taxes accrue interest at 5% a year with no penalties. Other states have their own versions: see property tax deferral programs for seniors and help for low-income seniors.
- Claim exemptions you missed. A homestead or senior exemption you never filed may cut future bills and, in some states, past ones. See senior property tax exemptions.
- Call your mortgage servicer. If you have a mortgage, the servicer may pay the taxes and add an escrow account. That costs you a higher payment (see escrow shortages) but stops the tax sale.
- Compare before borrowing. Texas has a market of private property tax lenders. Their loans can make sense in narrow cases, but compare them with the county's own plan first: property tax loans in Texas.
Watch for these
- Surplus "recovery" companies. After a tax deed sale, firms contact former owners and heirs offering to recover the surplus for a large percentage. In many states you can file the claim yourself with the clerk or treasurer for little or nothing. Read any contract before signing.
- Offers to "buy your tax problem." Someone who pays a small amount for a quitclaim deed from you may be after the equity or the surplus. Get a local attorney to look at it.
If you inherited the house, the delinquent taxes come with it. See property taxes on an inherited house for who has to pay while the estate is open.
If You're Thinking About Buying Liens or Deeds
A few facts, not a recommendation:
- The headline rate is a ceiling. Florida's 18%, Arizona's 16% and New Jersey's 18% are where bidding starts. Competition often pushes winning bids far lower.
- Most certificates are redeemed. You get your money back with interest, not a house. Getting a deed takes more fees, notices and sometimes a lawsuit.
- A tax deed can come with problems. Title insurers may not insure a tax deed until a quiet title action is done. In redeemable deed states, the former owner can buy the property back for up to two years.
Bottom Line
A tax lien is the county's claim on your house; a tax certificate is that claim sold to an investor; a tax deed is the house itself changing hands. Whichever system your state uses, you usually have months or years to redeem, and the cost grows the longer you wait: 18% a year in Florida, a 25% to 50% premium in Texas, 20% or more in Georgia. Call the county for an exact payoff, ask about payment plans and senior deferrals, and if the house is sold anyway, file for any surplus yourself before the deadline.
This is general information, not legal or investment advice. Tax sale laws change frequently and procedures vary by county. Confirm current rules and amounts with your county tax collector or treasurer, and consult an attorney licensed in your state about your situation.