Can You Sell a House With an IRS Tax Lien on It?
A federal tax lien can feel like a lock on your house. It is not. It is a claim the IRS has on your property, and federal law spells out how it comes off. Whether your sale price covers the tax or falls short, there is a path, and knowing which one you are on is the first step.
An older two-and-a-half story frame house with a wraparound front porch on a quiet street at dusk in late autumn, with bare trees, lit street lamps and warm light in one upstairs window
Yes, you can sell. An IRS lien is a claim on your house, not a lock. If the sale brings enough, the title company pays the IRS from the proceeds, and the IRS must issue a certificate of release within 30 days of full payment. If the sale will not cover it, you can apply for a certificate of discharge on Form 14135, which frees the house from the lien so it can be sold. In Ohio, the lien notice and the release are both filed with the county recorder.
What an IRS lien actually is
When someone owes federal tax and does not pay after the IRS asks for it, federal law turns that debt into a lien:
If any person liable to pay any tax neglects or refuses to pay the same after demand, the amount … shall be a lien in favor of the United States upon all property and rights to property, whether real or personal, belonging to such person.
That lien starts when the tax is assessed and lasts until the debt is paid or can no longer be enforced because time has run out. It covers the house along with everything else the person owns. To protect itself against buyers and other lenders, the IRS files a public notice of the lien. Federal law sends that notice to the office state law picks, and Ohio picks the county recorder of the county where the house sits. That is where a title search finds it.
Want to know if your sale would cover the lien?
Tell us the address and roughly what is owed. We will give you a no-obligation cash offer, so you can see whether the proceeds would pay the IRS in full or whether you need a discharge.
Before you list: find out what you are dealing with
Many owners only learn about a lien when a buyer's title search turns it up. It is better to know first. Because Ohio files these notices with the county recorder, a title company can find a filed IRS notice on your house early, before you sign anything. Ask for a preliminary title search when you first start thinking about selling.
Then find out how much the IRS says you owe, with interest, as of a date near your expected closing. Put that next to your mortgage payoff and a realistic sale price. That one comparison tells you which path you are on, and whether you need to plan time for a discharge application.
Path one: the sale pays it off
This is the simpler case. The house sells for enough to pay the mortgage, the IRS, the costs of sale and anything else on the title. The title company asks the IRS for the amount due, pays it out of the buyer's money at closing, and sends you what is left.
Once the debt is paid, the law puts a clock on the IRS. It must issue a certificate of release no later than 30 days after it finds the liability, with interest, has been fully paid. In Ohio, that release is filed with the same county recorder that holds the notice, which clears the record.
Two habits help here. Before closing, read the closing statement and find the line that pays the IRS, so you know exactly what was sent. After closing, keep your copy of the closing statement and watch for the release. If it does not show up on the county record within a reasonable time after that 30-day window, ask the title company to follow up. A clean record matters the next time you buy, borrow or sell.
Path two: the sale will not cover it
Sometimes the house is worth less than the mortgage plus the tax. Then there is not enough money to pay the IRS in full, and the lien would block a clean title. Federal law gives the IRS several ways to discharge the house from the lien so the sale can still close:
| Situation | What the law allows | Source |
|---|---|---|
| You own other property worth much more than the debt | Discharge if the property still under the lien is worth at least double the tax owed plus any liens ahead of it | 26 U.S.C. 6325(b)(1) |
| The sale pays the IRS part of what it is owed | Discharge if the IRS is paid at least the value of its interest in the house | 26 U.S.C. 6325(b)(2)(A) |
| Liens ahead of the IRS take all the equity | Discharge if the IRS decides its interest in the house has no value | 26 U.S.C. 6325(b)(2)(B) |
| The amount owed is disputed or still being worked out | Discharge if the sale proceeds are held as a fund subject to the IRS claim, by agreement | 26 U.S.C. 6325(b)(3) |
| You want to sell now and sort out the tax later | Discharge if you deposit money equal to the IRS interest, or post an acceptable bond | 26 U.S.C. 6325(b)(4) |
When the IRS values its interest, the law says it considers the value of the property and the liens that have priority over the IRS. Which liens come first depends on the facts, including when each was filed. A tax attorney or the title company can tell you where yours stand.
Applying for a discharge: what Form 14135 asks for
The IRS application is Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien. Reading the current form tells you what to gather before you apply:
Taxpayer and applicant details
The buyer and the money
Which basis you are using
An appraisal plus one more valuation
The closing numbers
The form asks for a buyer, a proposed sales price and a draft closing statement, so you need an accepted offer before you can apply. We did not find an official processing time in what we read, so we will not guess one. Build time for the IRS decision into your closing date, and tell the buyer about the lien up front.
Two situations that need a closer look
When only one owner owes the tax. The law puts the lien on property and rights to property belonging to the person who owes. If you own the house with a spouse or relative who does not owe, the lien reaches the interest of the person who does. How that plays out in a sale depends on how the title is held, so this is a question for a tax attorney before you set a price.
When the lien is old. Federal law generally gives the IRS 10 years after assessment to collect a tax by levy or by going to court. That period can be extended in some situations, such as when there is an installment agreement or a court case. The lien itself lasts until the debt is paid or can no longer be enforced. So do not assume an old lien has expired. If you think it has, ask the IRS for a certificate of release, which the law says it must issue within 30 days once it finds the liability has become legally unenforceable.
Which path are you on?
Your six options
- Keep the house. The lien stays until the tax is paid or can no longer be enforced. If you can work out the tax with the IRS, keeping the house may be possible.
- Repair it, then sell. A higher price may pay the IRS in full and avoid a discharge application. Repairs cost money up front, and the lien stays in place while you do them.
- Rent it out. Rent can help pay the tax, but the lien remains on the house the whole time.
- List it with an agent. The open market often brings the highest price, which matters when every dollar goes toward the lien. Ohio commissions usually run 5.5% to 6%, and those come out before the IRS is paid.
- Sell it yourself. No commission, which leaves more to pay the IRS. You handle the buyer, the title company and any discharge paperwork yourself.
- Sell direct. No commission, no repairs and no showings. Closings can happen as fast as 7 days and typically take around 21, though a discharge application can add time. The price will be below full retail.
With a lien, the math matters even more. For each option: start with the price, subtract the mortgage payoff, the IRS amount, commission, closing costs, repairs and holding costs. If the result is below zero, you are on the discharge path, and the IRS will look at the price you accept. A realistic price backed by an appraisal helps your application.
Get a number for your discharge math
We buy houses across Cleveland and Northeast Ohio with liens on them and close through a title company that handles the payoffs. Ask for an offer and run it against your other options. If listing would leave you better off, we will tell you.
This article summarizes 26 U.S.C. §§ 6321, 6322, 6323, 6325 and 6502, Ohio Revised Code § 317.09, and IRS Form 14135 (Rev. 11-2024) as we read them. It is general information, not legal or tax advice. IRS procedures and forms change, and lien priority depends on the facts. Talk to a tax attorney or enrolled agent about your own lien before you sell.
Questions about a lien on your house?
Call or send us the address. We will walk you through how a sale with a lien payoff would work, and you decide what comes next.
Frequently asked questions
Yes. The lien is a claim on the property, not a ban on selling it. In most sales it is paid from the proceeds at closing and then released. If the sale will not bring enough to pay it in full, federal law lets the IRS issue a certificate of discharge that frees the house from the lien so the sale can close.
If a person who owes federal tax neglects or refuses to pay after the IRS demands it, the amount becomes a lien on all of that person's property and rights to property, including real estate. The lien arises when the tax is assessed and lasts until the debt is paid or can no longer be enforced because time has run out.
Ohio law says notices of IRS liens, and the certificates that discharge or release them, are filed with the county recorder of the county where the property is. That is why a title search on your house will find a filed notice.
Federal law says the IRS must issue a certificate of release no later than 30 days after it finds the liability, with interest, has been fully paid or has become legally unenforceable.
The lien lasts until the debt is paid or can no longer be enforced. Federal law generally gives the IRS 10 years after assessment to collect by levy or a court case, but that period can be extended, for example by an installment agreement or a court case. Do not assume an old lien is gone without checking.
You can ask the IRS for a certificate of discharge for the house. The law allows one in several situations, including when the IRS is paid an amount at least equal to the value of its interest in the property, or when it decides its interest has no value after considering liens ahead of it.
IRS Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien. It asks for the proposed sales price and the amount expected to go to the IRS, and requires a professional appraisal by a disinterested third party plus one other valuation, along with a proposed closing statement or a list of the sale costs.
Federal law allows a discharge when the house is sold and, under an agreement with the IRS, the proceeds are held as a fund subject to the IRS claim, with the same priority the lien had on the house. Form 14135 asks for the settlement or escrow company in that case.
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