Last Updated on September 9, 2025
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A federal tax lien is the government’s legal claim against your property when you do not pay your tax debt. It attaches to everything you own—houses, vehicles and even future assets—and stays in place until the debt is settled. Although credit bureaus stopped reporting tax liens in 2018, lenders and counties still search public records. If a lien is on file, it can limit access to loans, increase interest rates and even keep you from bidding at tax‑deed auctions
What Taxes Can Trigger a Lien?
A lien is not limited to unpaid income tax; it may arise from several types of obligations:
| Unpaid tax type | Effect before 2018 | Effect after 2018 |
| Federal income tax | Lien could appear on credit reports | Lien no longer appears on credit reports, but lenders may still see it via public records |
| State income tax | Similar to federal; lenders viewed unpaid state taxes as risky | Still public record; may affect lending decisions |
| Property tax | Unpaid property taxes could lead to foreclosure | Same risk; liens are public record and can affect borrowing |
| Payroll taxes (for businesses) | Lien attached to both personal and business assets | Continues to affect creditworthiness; lenders review public records. |
Why Was 2018 a Turning Point
Prior to 2017, credit bureaus included tax liens in credit reports. In 2017 the bureaus began removing civil judgments and tax liens; by April 2018 all tax liens were purged from consumer credit reports. This change improved many credit scores overnight. However, a Notice of Federal Tax Lien is still a public document, and lenders can search court records to assess risk In other words, a lien may no longer hurt your score, but it can still hurt your borrowing opportunities.
How Long Does a Federal Tax Lien Last?
Under federal law, the IRS has ten years from the date a tax is assessed to collect the debt. This period is called the collection statute of limitations. If you file late, the clock starts when the IRS processes your return. Certain actions—such as filing bankruptcy or negotiating an installment agreement—pause the clock, extending the lien’s life. Once the statute expires, the lien is released; but during the ten‑year period the IRS can enforce collection actions like levying wages or seizing property.
How Does a Federal Tax Lien Affect Borrowing?
Even though liens no longer appear on credit reports, they still impact financial opportunities. According to a 2025 legal guide, tax liens can lead to higher interest rates, loan denials, lower credit limits and even lost employment in certain industries Lenders and landlords often review public records or request tax transcripts. If they see a lien, they may view you as a high‑risk borrower.
For investors, an unpaid county debt can also prevent you from bidding at certain tax‑deed auctions. Some counties require bidders to certify they do not owe any outstanding taxes; if you have a lien, your bidding privileges may be suspended.
How Do You Avoid a Federal Tax Lien?
The simplest way to avoid a lien is to pay and file your taxes on time. If you cannot pay, do not ignore IRS notices. Options include:
- Installment agreement: Pay the debt in monthly installments. Keeping payments current may make you eligible to have the Notice of Federal Tax Lien withdrawn.
- Offer in compromise: Settle your tax debt for less than the full amount if you can show financial hardship.
- Fresh Start Initiative: The IRS offers programs for taxpayers who owe under US$25,000 and can pay within 60 months.
- Appeal: If you believe a lien is filed in error, you can appeal to the IRS Office of Appeals.
Ignoring the issue only leads to escalating penalties and legal actions
What Should You Do If You Already Have a Lien?
If a lien has been filed:
- Verify the debt: Check the Notice of Federal Tax Lien and your tax transcript to confirm the amount.
- Contact the IRS: Call the Centralized Lien Operation (800‑913‑6050) to discuss payment or release options.
- Explore subordination or withdrawal: Subordination doesn’t remove the lien but allows other creditors to move ahead, improving chances of getting a mortgage. Withdrawal removes the public notice entirely if you qualify.
- Plan for long‑term finance: Resolving tax liens should be part of your broader financial plan. As one legal advisor notes, incorporating tax‑debt resolution can improve future credit usage and credit limits
Tips for Tax Lien and Deed Investors
As investors ourselves, we have seen how unpaid taxes can disrupt deals. Here are a few tips:
- Maintain clean records: Pay any outstanding county taxes before participating in auctions.
- Research county rules: Some counties bar bidders who owe taxes; review auction rules carefully.
- Understand redemption periods: After buying a lien or deed, the original owner often has a redemption period to reclaim the property. Knowing these timelines helps you plan your investment.
- Educate yourself: Learn how to identify promising properties. Our post on How to Pick Properties for Tax Deed Sales? shares our step‑by‑step process, from building a list to evaluating parcels.
- Build your knowledge base: New to tax liens? Our Tax Lien & Deed Quick Start Secrets video explains the fundamentals and common pitfalls.
Frequently Asked Questions
The lien attaches to all your current and future assets. It becomes public record, which means lenders and counties can find it. Although it no longer appears on credit reports, it may still limit your access to credit
Paying the debt (including penalties and interest) releases the lien. You should receive a Certificate of Release from the IRS; keep this document and check that the lien is removed from public records.
Yes. Some counties require bidders to be current on all taxes. If you have outstanding county or federal tax debt, your bidding privileges may be revoked.
If you meet certain conditions—such as owing less than US$25,000 and making three consecutive direct‑debit payments—you can request withdrawal of the Notice of Federal Tax Lien. Subordination and discharge are other options that require IRS approval.
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Conclusion and Call to Action
A federal tax lien is serious. Even though it may no longer reduce your credit score, it still attaches to your property, shows up in public records and limits your financial options. Pay your taxes on time, respond to IRS notices promptly and seek professional advice if you are unable to pay.If you want help navigating tax liens and deeds, we offer free resources and personal guidance. Download our free mini‑course to learn how to buy tax lien and deed properties at steep discounts. When you are ready to start or scale your investing, book a free call and we will walk you through your first deal.
