Tax Liens 101
If you are unfamiliar with tax liens, let me explain the basics. Tax liens are used to obtain delinquent tax amounts owed on real or personal property. A tax lien can be used to obtain delinquent personal taxes, such as overdue income taxes, or for taxes owed on the asset.
A real property tax lien is the most common type of tax lien. There is one major difference between real property tax liens and personal property tax liens. The difference is that with real property tax liens the lien attaches to the real property and remains with it. So, if you just purchased a piece of real property and there was a tax lien against it, you will be responsible for payment of the delinquent taxes if the tax lien was not discovered prior to the close of the sale.
The real property owner and mortgage lender will be served with a notice if taxes become delinquent on the property. A title search is invaluable if you are thinking of purchasing a piece of real estate. The existence of any tax liens will show up on a title search, thereby alerting you to the fact that there are unpaid taxes due.
When a property is sold which has outstanding taxes due, any lien against the property will normally be paid from the proceeds of the sale as a portion of the closing costs. If a tax lien is not detected prior to the sale, the delinquent tax will pass to the new owner.
When the mortgage holder and home owner are served with a notice of delinquent taxes due, the mortgage holder will frequently pay the taxes in order to make sure they are paid. Once this is done, the home owner will be billed for the total amount paid by the mortgage holder. You might wonder why this is done. A governmental tax lien is classed higher than a mortgage payment so the mortgage holder often feels it should pay the amount due in order to protect its interest in the real property.
If this doesn't happen, the home owner has several options to consider in order to pay the delinquent taxes. Two options to consider are paying the overdue taxes directly or using an escrow account.
Normally, the home owner will have a length of time in which to pay the back taxes. If the taxes are not paid within this time period, the property can be seized, subsequently sold, and the proceeds used to pay the delinquent taxes.
Income tax and gift tax are examples of two types of tax which might cause a tax lien if not paid. For these types of taxes, federal law will apply. Adversely, state tax liens will be governed by that state's laws. In order not to land in the middle of this kind of situation, it is best to pay any tax when it comes due. Additionally, it is wise to order a title search for any piece of property you are thinking of purchasing.
A real property tax lien is the most common type of tax lien. There is one major difference between real property tax liens and personal property tax liens. The difference is that with real property tax liens the lien attaches to the real property and remains with it. So, if you just purchased a piece of real property and there was a tax lien against it, you will be responsible for payment of the delinquent taxes if the tax lien was not discovered prior to the close of the sale.
The real property owner and mortgage lender will be served with a notice if taxes become delinquent on the property. A title search is invaluable if you are thinking of purchasing a piece of real estate. The existence of any tax liens will show up on a title search, thereby alerting you to the fact that there are unpaid taxes due.
When a property is sold which has outstanding taxes due, any lien against the property will normally be paid from the proceeds of the sale as a portion of the closing costs. If a tax lien is not detected prior to the sale, the delinquent tax will pass to the new owner.
When the mortgage holder and home owner are served with a notice of delinquent taxes due, the mortgage holder will frequently pay the taxes in order to make sure they are paid. Once this is done, the home owner will be billed for the total amount paid by the mortgage holder. You might wonder why this is done. A governmental tax lien is classed higher than a mortgage payment so the mortgage holder often feels it should pay the amount due in order to protect its interest in the real property.
If this doesn't happen, the home owner has several options to consider in order to pay the delinquent taxes. Two options to consider are paying the overdue taxes directly or using an escrow account.
Normally, the home owner will have a length of time in which to pay the back taxes. If the taxes are not paid within this time period, the property can be seized, subsequently sold, and the proceeds used to pay the delinquent taxes.
Income tax and gift tax are examples of two types of tax which might cause a tax lien if not paid. For these types of taxes, federal law will apply. Adversely, state tax liens will be governed by that state's laws. In order not to land in the middle of this kind of situation, it is best to pay any tax when it comes due. Additionally, it is wise to order a title search for any piece of property you are thinking of purchasing.
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