Search:

Understanding Tax Lien?

Let us first separate the word ‘tax’ from lien and try to understand what is a lien. A lien is nothing more than a claim on a property that is used to assure the payment of a debt.

Although this is usually a property, it need not be so. For example if you accept a loan from a bank to buy a car, the bank has a lien on the vehicle. This lien or claim is like a ‘guarantee’ for the bank and is discharged only when all outstanding debt is paid.

The same principle applies to financing a house through a mortgage broker. In this case, the lien usually entitles the mortgage broker the right to take back the property if timely payment is not made according to the terms of the agreement.

So what is a tax lien? It is a lien enforced by law on property to secure the payment of taxes. It is imposed on real or personal property for failure to pay taxes and applies to even income tax.

A tax lien on properties ‘runs’ with the property owner. It means that the new property owner is responsible for paying the taxes even though the tax was incurred by a past owner.

The rulings in various states differ on this matter but depending on the law of jurisdiction, the owner of the property may be held personally accountable for the payment of all relevant taxes. Payment of a tax lien may be made directly by the property owner, or in some cases may be paid indirectly by the mortgage holder. Sufficient notice is always given to both the property owner as well the mortgage holder when a property tax is delinquent so all parties involved are ‘current’ regarding the tax situation.

If the tax lien is not paid off within a specified time, the property can be taken back and sold at a foreclosure sale. This is usually done after attempts are made to collect the outstanding debts. If a property is sold before tax foreclosure, the tax lien is often included in the sale value.

In dealing with the result of foreclosure on a property, one of two methods may be used. When a property is seized and sold it is called a tax deed sale. The tax lien can also be offered to investors, depending on the state, in the form of a tax lien certificate and it allows investors to begin foreclosure proceedings after a known waiting period. This is known as a tax lien sale.

It goes without saying that it is desirable to stay current on the payment of taxes on property as this saves time and frustration in dealing with foreclosure actions. It is also good practice to check that the property that you plan to acquire is free of a tax lien.

Article Source: http://www.topicinfo.com

Ken Fong Real Estate Information - More on Building Homes

Please Rate this Article

Not yet Rated

Click the XML Icon Above to Receive Taxes Articles Via RSS!

Additional Articles From - Home | Finance | Taxes

How to Become a Texas Realtor - By : James Marshall
Living Trust - By : michael dinich dinich
Tax Credit For Hybrid Car - By : Anton Rowd
S Corporation Tax Status for Your LLC - By : Robert Montgomery
Use The Same Techniques The Rich And Famous To Avoid Taxes! - By : Lee H
Charitable Tax Deductions are Easy and Rewarding - By : Angelina Pyrkins
Tax Refund – When Is It Coming? - By : Rich Chappo..
The IRS Letter You Don’t Want to Receive - By : Rich Chappo..
How Tax Deductions Work - By : rateempire
Tax Help Is Available For Those Who Honestly Seek It - By : Bernard Pruett

	Print This Article
	Post Comment
	Add To Favorites
	Email to Friends
	Ezine Ready

Submit Articles
Member Login
Top Authors
Most Popular Articles
Submission Guidelines
Ezine Notifications
Article RSS Feeds

About Us
Submit Link
Contact Us
Privacy Policy
Terms of Service