When the IRS Is After You, Can You Still Sell Your House?

Imagine opening your mail and seeing that unmistakable IRS logo on the envelope. Your pulse quickens before you even tear it open. Inside, you find a notice that a federal tax lien has been filed against you — and your home. Suddenly, questions start racing through your mind. Can you still sell your house? Will the IRS take your profit? Is there any way out of this without losing everything?

It’s not as hopeless as it feels. Selling a house with an IRS lien attached is difficult, yes, but it’s not impossible. With the right information and strategy, you can satisfy your tax debt and walk away with your financial stability intact.

Understanding What an IRS Lien Really Means

When the IRS places a lien on your property, it’s their legal claim against your assets — not just your house — for unpaid taxes. According to the Internal Revenue Service, a tax lien gives the government the right to secure payment by claiming a legal interest in your real and personal property. That includes your home, car, and even business assets.

The lien isn’t a seizure, though many homeowners confuse it with a levy. A lien is a claim. A levy, on the other hand, means the IRS is actively taking property or funds to pay off the debt. If you’re still at the lien stage, you have time to act.

In my experience as a real estate investor and consultant, I’ve seen homeowners panic unnecessarily when a lien notice arrives. The truth is, with good planning and communication, you can often sell your home and even use the proceeds to settle what you owe. The IRS just wants its money — not your house.

How an IRS Lien Affects Your Ability to Sell

Once the lien is recorded, it becomes public record and attaches to the property’s title. That means when you try to sell, the title company will find it during their search, and the sale can’t close until the lien is addressed. Most buyers won’t move forward unless the title is clear.

You can’t simply transfer ownership or pocket the profit until the IRS releases or satisfies its claim. But there are several ways to do this legally.

• Paying off the debt in full: The fastest and cleanest option. Once the IRS receives full payment, they’ll issue a Certificate of Release of Federal Tax Lien, usually within 30 days.
• Applying for a lien discharge: This removes the lien from your specific property, allowing you to sell, even if you still owe taxes. The IRS might approve this if the sale will produce funds to pay part or all of your debt.
• Requesting lien subordination: This doesn’t remove the lien but allows another creditor — like your buyer’s lender — to take priority, making the sale or refinance possible.

The IRS reviews these requests on a case-by-case basis. It’s paperwork-heavy, but it’s doable. You just need to demonstrate how the sale benefits both you and the IRS.

Working with the IRS During the Sale Process

The IRS isn’t as immovable as people assume. In fact, their own materials encourage cooperation. The key is communication and documentation. If you try to sell without informing them, the sale can collapse at closing when the lien appears on title.

Here’s how to stay ahead of the process:

• Contact the IRS early: Call the number on your lien notice and explain that you intend to sell your property. Ask about the payoff amount and what documentation they’ll need to release or discharge the lien.
• Request a payoff statement: This is a formal document stating how much you owe, including interest and penalties. It’s usually valid for 30 days.
• Work with a tax professional or attorney: An enrolled agent or tax attorney can help you negotiate terms and submit the right forms, such as Form 14135 (Application for Certificate of Discharge of Property from Federal Tax Lien).
• Keep your buyer informed: If you’re upfront, serious buyers will often wait through the process, especially if your home is competitively priced.

Once you have IRS approval for the sale, the title company will send the agreed-upon payment directly to the IRS from your sale proceeds. Afterward, the lien is officially released.

What Happens to Your Equity When You Sell

Let’s say your home sells for $450,000, and you owe $50,000 in taxes. If you still have a mortgage balance of $300,000, the IRS lien ensures they get paid before you pocket anything. That means the title company will first pay off your mortgage, then the IRS, and whatever’s left goes to you.

If your equity doesn’t fully cover what you owe, the IRS may still approve the sale and release the lien if you can demonstrate hardship or prove that selling benefits them more than foreclosure would. Sometimes they’ll agree to remove the lien so long as you continue making payments through an installment plan.

It’s worth noting that tax liens can also affect your credit report. While they no longer appear on credit scores like they once did, lenders and potential buyers can still see them in public records. That makes resolving them even more important if you plan to buy again later.

Can You Sell a House While Under an IRS Payment Plan?

Yes, you can. In fact, if you’ve already negotiated an installment agreement or offer in compromise with the IRS, you’re in a better position than most. It shows good faith. You’ll still need to get approval for the sale if the lien is tied to the property, but the process is smoother when the IRS sees that you’ve been making consistent payments.

A tax attorney or enrolled agent can request a lien discharge or subordination on your behalf. The more transparent you are about your plan to pay off what’s owed, the more likely the IRS will cooperate.

It’s a bit like dealing with a lender: they just want assurance that they’ll get paid. Once that’s clear, they’re often willing to work with you.

When Selling to Pay Off the IRS Makes Sense

Sometimes homeowners hold on too long out of fear or pride. But selling, even under pressure, can bring relief. If your tax debt keeps growing and interest or penalties are snowballing, selling your house could help you regain control.

Here are some situations where selling to resolve IRS debt might be the smartest move:

• You owe more than you can feasibly pay off within a few years.
• You’ve received repeated collection notices or are facing a possible levy.
• Your home has appreciated in value, and selling could eliminate your tax debt entirely.
• You’re downsizing or relocating anyway, and clearing your IRS balance helps you start fresh.

The IRS is less aggressive when they see proactive steps toward repayment. Selling voluntarily is far less stressful than dealing with wage garnishments or bank levies later.

What If the IRS Has Already Filed a Levy?

A levy is more serious than a lien — it’s when the IRS actually seizes assets or garnishes wages. If your home is already under levy threat, you’ll need immediate legal help. You can appeal a levy or request a release by showing financial hardship or offering an alternative payment arrangement.

The good news is that the IRS rarely forces the sale of a primary residence, especially if dependents or elderly relatives live there. But they can, and do, when homeowners ignore notices for too long. Acting early is your best defense.

If the IRS already levied your home, the process becomes complex, but not hopeless. A skilled real estate attorney or tax professional can often negotiate a temporary release or sale approval to allow repayment through closing.

Finding Buyers When There’s a Tax Lien

One of the hardest parts about selling under an IRS lien is finding buyers willing to wait for the discharge process. Traditional buyers may hesitate, especially if financing is involved. That’s where cash buyers can make a big difference.

Cash buyers don’t rely on banks, which speeds up closing and eliminates lender red tape. They’re used to handling properties with title complications, probate issues, or tax liens. By agreeing to a cash offer, you can often close within days of the IRS approving the sale — not months.

Final Thoughts

Having the IRS after you feels isolating, but you’re not powerless. You can still sell your house, pay off your debt, and protect your financial future if you act strategically and seek the right help. Don’t let fear stall you; clarity is what brings relief.

If you’re dealing with IRS debt or liens, trusted local buyers like Pavel Buys Houses can help. We purchase homes directly from owners in any situation, even those with tax liens, unpaid debts, or urgent deadlines. Our process is confidential, fast, and transparent — no commissions, repairs, or hidden fees. You can sell your house, settle your IRS obligations, and move forward knowing everything was handled professionally and respectfully. Sometimes, peace of mind really is just one good decision away.

Pavel Khaykin

Pavel Khaykin is the founder and author of Pavel Buys Houses, a nationwide home buying company that helps homeowners sell their properties quickly for cash. With a strong background in real estate and digital marketing, Pavel has been featured in The New York Times, ABC News, and The Huffington Post. His mission is to make the home-selling process simple, transparent, and trustworthy for every homeowner he works with.