How to Sell a House With a Tax Lien or Back Property Taxes in Utah
Tax problems on a house tend to snowball quietly. A year of property taxes gets skipped during a hard stretch, then another, and penalties and interest pile on. Or an IRS debt turns into a federal tax lien that shows up when you try to refinance. Here is how these problems generally work in Utah, and how selling can resolve them.
This is general information, not tax or legal advice. Your county treasurer can give you exact figures, and a tax professional can help with IRS issues.
Part 1: Delinquent Utah property taxes
How delinquency starts
Utah property taxes are assessed by the county and billed annually. If they are not paid by the due date on the notice, they become delinquent, and penalties and interest are added. The county treasurer tracks delinquent parcels.
The four-year redemption period
Utah law gives owners time to catch up, called redemption. Under Utah Code 59-2-1343, if a property is not redeemed by March 15 following the lapse of four years from the date the taxes became delinquent, the county treasurer lists the property for the county's tax sale. You can generally redeem before then by paying the delinquent taxes, penalties, interest and costs.
The county tax sale
Under Utah Code 59-2-1351, the county auditor holds the tax sale in May or June. It may be held in person at the county courthouse or through an electronic process that the public can watch and bid in. If a property sells, the owner loses it. If there is money left over after taxes and costs, there may be a process to claim it, but relying on that is a poor plan compared with selling first.
Your options before the tax sale
- Pay in full to redeem the property.
- Ask the treasurer about payment options or relief programs. Some Utah counties offer relief or deferral for qualifying seniors, veterans or low-income owners; ask what is available.
- Sell the property. The title company pays the delinquent taxes out of the proceeds at closing.
Part 2: IRS and other tax liens
What a federal tax lien does
When someone owes federal taxes and does not pay after a demand, a federal tax lien arises against their property. The IRS may file a Notice of Federal Tax Lien in the county records, which alerts buyers and lenders. The lien attaches to your house and other assets.
Selling with an IRS lien
You can generally still sell. The title company will see the lien and request a payoff. If the sale proceeds cover the lien, it is paid at closing and released. If they do not, the IRS has a process to apply for a certificate of discharge for the specific property, which can allow a sale to go through even when the lien is not paid in full. IRS Form 14135 and Publication 783 explain the application. A tax professional who has done these before can save a lot of time.
State tax liens
The Utah State Tax Commission can also file liens for unpaid state taxes. These are handled similarly at closing: the title company requests a payoff and the lien is paid from the proceeds.
How a sale clears tax debt
At closing, the title company works through the payoff list in order: mortgages, tax liens, other liens and closing costs. Delinquent property taxes are paid to the county. Recorded tax liens are paid to the IRS or state. Whatever is left goes to you. This is why selling while you still have equity can protect money that a tax sale would put at risk.
A quick example of the math
Hypothetical round numbers for illustration only.
Say a house would sell for $300,000. The owner owes $150,000 on the mortgage, $12,000 in delinquent property taxes with penalties and interest, and $20,000 on an IRS lien. At closing, the title company pays all three, plus closing costs, and the owner walks away with the remainder. Compare that with losing the house at a tax sale or letting the liens keep growing.
When time is short
If a tax sale date is approaching, speed matters. A cash buyer can often close faster than a financed buyer because there is no lender. Tell any buyer about the deadline immediately so they can order title work right away.
Watch for scams
Be wary of anyone who offers to "pay your taxes" in exchange for a deed while promising you can stay, or who asks for money up front. Pay taxes directly to the county treasurer, and close any sale through a licensed title company.
The bottom line
Utah gives owners a multi-year window to redeem delinquent property taxes before a tax sale, and tax liens do not stop a sale. The earlier you act, the more of your equity you can protect.
Laws change. This is general information, not legal advice. Talk to a Utah attorney about your situation.
General information only, not legal, tax or financial advice. Laws and programs change; talk to a Utah attorney, CPA or HUD-approved housing counselor about your situation.