Written By: Michael Vale
Reviewed By: Bridgette Austin, Esq., EA, Co-Founder and Tax Attorney
Last Reviewed: August 19, 2026
Yes, you can sell or refinance a home that has an IRS tax lien on it. People do it every month. The lien makes the deal harder, not impossible, and the route depends on one number: how much equity sits in the house above your mortgage.
If you have equity, you can often pay the lien from the sale proceeds at closing, or ask the IRS to step behind your new mortgage so a refinance can fund. If you are short on equity, the IRS can take its lien off that one property so the sale still closes, even when the debt is not paid in full. Each route has its own IRS form and its own timing. Miss the timing and your closing slips.
Here is how each path works, which form goes with it, and how to read your own numbers.
What an IRS tax lien does to a sale or refinance
A tax lien does not freeze your house. It clouds the title, which means most buyers and mortgage lenders will not close until the lien is paid, taken off the property, or moved behind the new loan.
An IRS tax lien is the federal government’s legal claim against everything you own once you neglect or refuse to pay a tax bill. It attaches to your house automatically. It turns public when the IRS files a Notice of Federal Tax Lien at your county, and that public record is what clouds the title and worries buyers and lenders.
The lien reaches all of your property, not just the house, and it follows property you buy later while the debt is open. A lender writing a new mortgage wants to be first in line if the loan ever goes bad. A federal lien sits ahead of that new loan by default, which is the whole problem you are solving. The good news: once the debt is paid, the IRS will release the lien within 30 days, and there are ways to clear the path before it is paid in full.
Can you sell a house with an IRS tax lien?
Yes. If the sale price clears your mortgage and the lien with room to spare, the closing agent pays the IRS out of your proceeds, the same way it pays off your mortgage.
Start by asking the IRS for an exact payoff. The Centralized Lien Operation handles payoff and release requests at 800-913-6050. At closing, the title company wires the lien amount to the IRS, the same as any other payoff, and the IRS issues a Certificate of Release. When you pay in full, that release comes within 30 days.
The order of payoff matters more than the exact figures. Senior claims get paid first, your mortgage payoff comes out, the IRS lien is paid from what is left, and you keep the remainder. As long as the proceeds cover the mortgage and the lien, the deal closes without special IRS paperwork.
Now the harder case, and the one most advice gets wrong. What if the house will not cover everything? You do not have to pay the full tax debt first. Under a certificate of discharge, the IRS removes its lien from that specific property so the sale can close, even if it collects little or nothing from this house. The IRS explains the rules in Publication 783, and the application is Form 14135. If your equity covers part of the lien, the IRS usually takes that available equity and lets the deal go through. If you are underwater, the lien is worth nothing against this house, and the IRS can still discharge it so a buyer gets clean title.
Can you refinance while the lien is still there?
Yes, but the bank has a problem first: a federal tax lien outranks a new mortgage, and lenders want first position. The fix is subordination.
Subordination does not remove the lien. It moves the IRS behind your new loan for that one transaction. The IRS spells out eligibility in Publication 784, and the application is Form 14134. The IRS agrees to step back when doing so helps it get paid, which usually means one of two stories:
A cash-out refinance that sends money to the IRS. If you pull equity and a chunk of it pays down the tax debt at closing, the IRS is better off saying yes.
A rate-and-term refinance that lowers your payment. If your new mortgage cuts your monthly cost, the IRS sees more room in your budget to pay the debt, so it will often move to second position.
Either way, treat the application like a loan package. Show the numbers: who gets paid, in what order, and how the government is at least as protected after closing as before.
Discharge, subordination, withdrawal, or release: which one do you need?
These four words get mixed up constantly, and ordering the wrong one costs weeks. Here is the plain version.
| IRS tool | What changes | When it fits | Form or publication |
|---|---|---|---|
| Release | The lien ends after the debt is paid | You pay in full, often from sale proceeds | Publication 1450 |
| Discharge | The lien comes off one specific property | Selling with little or no equity for the IRS | Form 14135, Publication 783 |
| Subordination | The IRS moves behind a new loan; the lien stays | Refinancing, or taking a new mortgage | Form 14134, Publication 784 |
| Withdrawal | The public notice is pulled; you still owe | Cleaning up your record while on a payment plan | Form 12277 |
Sales usually run on a discharge. Refinances usually run on a subordination. A release is what you get when the debt is gone. A withdrawal is about your public record and credit, not about closing a specific deal.
How much equity do you actually need?
The IRS looks at what it can collect from your property after anything with higher priority, like your mortgage, gets paid. Your equity above the mortgage is the number that decides your route.
| Your position | Likely route | Why it works |
|---|---|---|
| Equity covers the mortgage plus the full lien | Pay the lien from proceeds, get a release | The money is there at closing |
| Some equity, but not enough for the full lien | Discharge, with the available equity paid to the IRS | The IRS takes what it can, frees the title |
| No equity above the mortgage (underwater) | Discharge, with little or nothing to the IRS | The lien has no value against this house |
| Refinancing to pull cash and pay the IRS | Subordination, with a payment at closing | Cash to the IRS supports the approval |
| Refinancing for a lower payment only | Subordination based on improved ability to pay | A lower payment means more toward the debt |
Two homes with the same lien can sit in completely different spots. One has plenty of equity and pays the lien at closing without a second thought. The other is underwater and needs a discharge just to hand the buyer clean title. Same lien, different form, different timeline. Read your own equity before you assume you are stuck.
The forms, timelines, and IRS contacts for 2026
Three forms cover almost every case, and the IRS wants them well before your closing date.
Form 14135 asks for a discharge (Publication 783). Form 14134 asks for a subordination (Publication 784). Form 12277 asks to withdraw the public notice. Discharge, subordination, and withdrawal requests go to the IRS Collection Advisory Group, and Publication 4235 lists the office that covers your area. For a payoff figure or to confirm a release, the Centralized Lien Operation answers at 800-913-6050.
Timing is where deals fall apart. These reviews take weeks, and longer when the file is missing documents. Start as soon as you have a signed purchase agreement or a loan estimate, not the week of closing. Send the lien copy, the title work, and the sale or loan figures together the first time. When you do pay a debt in full, remember the release lands within 30 days, so confirm it rather than assuming the record updated on its own.
Michigan homeowners have a second lien to clear
If you live in Michigan, you may have two liens to handle, not one.
The IRS is federal. The state is separate. The Michigan Department of Treasury can file its own Notice of State Tax Lien at your county Register of Deeds when you owe back state tax. Like the federal version, it is public record, and in most cases you cannot sell or transfer the property until the past-due state tax is paid. A Michigan state tax lien has its own payoff and release process, run by the state, not the IRS.
At closing, both liens have to be dealt with. A title company will find both in the county records, and both need a payoff, a discharge, or a release before the sale funds. Planning for only the federal side is how Michigan sellers get surprised at the closing table.
What if you can’t cover the lien before you sell?
Sometimes the sale math does not work, or you would rather keep the house. A few paths buy time or shrink the debt.
Set up an installment agreement. A payment plan does not erase the lien, but it can clear the way to withdraw the public notice. Once you owe $25,000 or less and move to a Direct Debit Installment Agreement, you can apply to pull the public notice after three consecutive payments, as long as the plan pays the debt within 60 months and you stay current on your other filings and payments.
Settle for less with an offer in compromise, if you qualify. When the IRS accepts a reduced amount as full payment and you finish the terms, the lien gets released.
Ask for currently not collectible status if paying anything would leave you short on basics. It pauses active collection. It does not remove the lien, but it stops the bleeding while you plan the sale.
Consider the clock. The IRS generally has ten years from the date it assesses a tax to collect it. In some cases the smarter move is a payment plan that runs toward that deadline rather than a rushed sale at a bad price. Do not count on it without checking your own dates, because certain events pause or extend that window. Bankruptcy is rarely the shortcut people expect either, since a recorded federal tax lien can survive a bankruptcy even when some of the underlying tax is wiped out. The best move is to deal with a lien early, before it ever reaches this stage. The same rules trip up buyers, which is worth knowing if you are buying your next home with tax debt still open.
When to bring in a tax resolution team
The value is not in knowing the forms exist. It is in matching the right form to your exact equity and closing date, filing it early enough, and answering the IRS the way it wants to be answered, so your deal funds on schedule.
If you have a sale or refinance in motion and a Michigan lien to clear, the sooner the paperwork starts, the better your odds of closing on time. You can talk through the options with Austin & Larson Tax Resolution before your closing date is locked in.
FAQs
Can I sell my house if I have an IRS tax lien?
Yes. If your sale price covers the mortgage and the lien, the title company pays the IRS from your proceeds at closing and you get a release. If there is not enough equity, you can ask the IRS for a discharge, which takes the lien off that property so the sale can close.
Do I have to pay the IRS lien in full before I sell?
No. A certificate of discharge under Publication 783 lets the sale close when your equity will not cover the full debt. The IRS takes whatever equity is available from the property, and it can approve a discharge even when it collects little or nothing from that house.
How do I refinance with an IRS tax lien on my home?
You ask the IRS to subordinate its lien using Form 14134, which moves the government behind your new mortgage so the lender can take first position. The lien stays on your record, but the refinance can fund. Approval is stronger when cash from the loan goes to the IRS or your new payment is lower.
What is the difference between a lien discharge and a subordination?
A discharge removes the lien from one specific property, usually so you can sell. A subordination leaves the lien in place but moves the IRS behind a new loan, usually so you can refinance. Discharge is for sales, subordination is for financing.
How long does the IRS take to approve a discharge or subordination?
Plan on weeks, and sometimes longer if the file is incomplete. File as early as you can once you have a purchase agreement or a loan estimate. For comparison, when you pay a debt in full the IRS releases the lien within 30 days.
Can a payment plan get the lien notice off my public record?
It can. Once your balance is within the IRS limit and you set up a Direct Debit Installment Agreement, you can apply to withdraw the public notice after three consecutive payments, as long as the plan pays the debt on schedule and you stay current on everything else.
Do Michigan homeowners face a separate state tax lien?
Yes. The Michigan Department of Treasury can file its own Notice of State Tax Lien at your county Register of Deeds. Like the federal lien, it is public and generally has to be cleared before you can sell or transfer the property.
Bridgette Austin, Esq., EA, spent three years at Michigan State University’s Tax Clinic representing low-income taxpayers before the IRS – two as a student clinician, one as a post-graduate fellow. That work shaped her practice. A Bellaire, Michigan native with a Northern Michigan University bachelor’s and an MSU law degree, she now resolves IRS and State of Michigan tax debt cases at Austin & Larson.
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