posted on 06-06-2019

Tax Lien

Updated August 6, 2020

What is Tax Lien?

A tax lien is a claim placed on a piece of real estate by a tax authority due to a taxpayer's failure to pay taxes.   

How Does Tax Lien Work?

When a taxpayer fails to pay either income taxes or property taxes, the taxing authority to whom the debt is owed may place a lien against the taxpayers property to ensure that the tax liability will eventually get paid. A property with a tax lien cannot be sold by the owner, which prevents the owner from walking away from the tax liability.

Why Does Tax Lien Matter?

Tax liens are highly effective for tax enforcement since the property holder can not sell a property that has a lien on it. The taxing authority will keep a lien on the property until the tax liability is paid. 

Tax liens can be purchased by investors as an investment. Such investments are considered solid since they are tied to a hard asset