Owing back taxes can feel overwhelming, especially if you can’t pay. One of the biggest fears taxpayers have is losing their home to the IRS. The good news is that in most cases, the IRS will not seize your home, especially if you owe less than $5,000. However, there are certain circumstances where your property could be at risk if your tax debt remains unresolved.
Key Takeaways
Most people don’t lose their homes. If you owe a smaller balance or are in contact with the IRS, you generally don’t have to worry about your house being taken.
Liens aren’t the same as losing your home. The IRS may place a lien to secure what you owe, but that just affects selling or refinancing—it doesn’t mean you’ll be kicked out.
Taking action keeps you safe. The best way to protect your home is to work out a payment plan or settlement with the IRS instead of ignoring the problem.
Tax Liens: The Most Common Action
If you owe the IRS a significant amount, typically $10,000 or more, the agency may file a tax lien against your property. A lien doesn’t mean you’ll lose your home. Instead, it’s the government’s legal claim to your property to secure the debt.
This means if you try to sell your home or tap into its equity, the IRS has the right to collect from the proceeds. Although a lien doesn’t force you out of your house, it can cause serious financial headaches, such as making it difficult to refinance or obtain new loans.
When the IRS Can Seize Your Home
There are instances when the IRS can move from placing a lien to taking more aggressive collection actions, including a tax levy. A levy is when the IRS seizes property or assets to satisfy a debt. With homes, this usually only happens in extreme situations such as:
- Tax fraud or tax evasion
- Large, unpaid tax debts that remain ignored for years
Even under these circumstances, the IRS very rarely forecloses on a taxpayer’s primary residence. Before doing so, the IRS must:
- Exhaust other collection options, such as installment agreements or an Offer in Compromise (OIC)
- Petition the Department of Justice to pursue legal action
- Prove that the home has sufficient equity to cover the tax debt
If there isn’t enough equity in the property, the IRS won’t pursue a seizure.
Why Ignoring the IRS Is Risky
Although the chance of losing your home is slim, ignoring IRS notices can still have serious consequences. A lien on your home can tie up your equity, making it hard to borrow against or sell the property. The IRS also has other collection tools at its disposal, such as:
- Wage garnishments
- Bank account levies
- Seizure of other assets (like vehicles or investment accounts)
These actions can create financial instability that’s much harder to recover from than if you had addressed the tax debt earlier.
The Best Way to Protect Your Home
The smartest move is to be proactive. If you owe back taxes, explore your repayment options before the IRS escalates collection efforts. Common solutions include:
- Personal loans to quickly pay off your balance
- IRS Installment Agreements that allow you to pay over time
- Offer in Compromise (OIC) to settle for less than you owe, if you qualify
- Currently Not Collectible (CNC) status if you’re experiencing financial hardship
By working with the IRS or a trusted tax relief professional, you can keep collection actions from spiraling out of control and protect your most valuable asset – your home.