Today, Optima Tax Relief’s Lead Tax Attorney, Phil Hwang, discusses taxes and real estate, including buying, selling, and refinancing your home while owing taxes.
Tax Liens
Real estate transactions can quickly become tricky if you owe taxes and even more so if the IRS places a tax lien on your property. This means that if you sell your home, after the bank is paid, the IRS will then have first dibs on any profits from the sale. That said, it’s not impossible to sell your home while a tax lien is attached to it. However, it might make it more difficult. Plus, you’ll likely lose out on profits. One option you have is to request a lien discharge with IRS Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien. The IRS may consider discharging the lien if:
- You want to take out a loan against the property and use the funds to pay your tax bill and need the lien to be discharged in order to qualify for the loan
- You want to refinance your existing home loan so you can afford monthly tax payments
- You want to sell the property and agree to pay the IRS the profits of sale up to the lien value
- You want to sell or transfer the property but there is no value that the IRS can claim
Refinancing While Owing Back Taxes
When it comes to refinancing while owing back taxes, you’ll need to apply for a lien subordination through IRS Form 14134, Application for Certificate of Subordination of Federal Tax Lien. This will request that the IRS allows your mortgage refinance lender to move ahead of the tax lien in priority.
Tune in next Friday for another episode of “Ask Phil.” Next week’s topic: tax extensions!
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