Selling Your Home With an IRS Lien: Discharge Paths and Costs

You can sell a home with an IRS lien on it, but you have to get the lien removed from the property first by applying for a certificate of discharge. The lien attaches to everything you own once the IRS files its Notice of Federal Tax Lien, and no title company will close a sale while that cloud sits on the title.¹ A discharge lifts the lien from the specific property you’re selling so you can hand over clean title; the lien stays attached to your other assets and to any remaining tax debt.² Plan on at least 45 days of lead time before your closing date.

Why the Lien Stops the Sale

Once the IRS files a Notice of Federal Tax Lien in your county’s public records, every title company, buyer, and lender can see it. A buyer can’t receive clear title because the government’s claim follows the property. Title companies will flag the lien and refuse to close until it’s resolved. So the question isn’t whether you can sell around the lien. You can’t. The question is which discharge path fits your numbers.

Which Discharge Path Fits Your Sale

The IRS can issue a discharge under several circumstances, and the one that applies depends on how much equity the sale will produce relative to your tax debt.

Sale Proceeds Cover the Tax Debt in Full

This is the simplest case. You sell the home, the settlement agent sends payment to the IRS directly from escrow, and the lien is satisfied. If the sale generates enough to cover any senior mortgage and the full tax balance, the IRS issues the discharge so the closing can proceed. Most title companies handle this routinely once the certificate is in hand.

You Have Equity, but Not Enough to Pay in Full

If the proceeds won’t cover the whole tax debt, the IRS can still discharge the property if you pay at least the value of the government’s interest in it. The IRS calculates that interest by taking the expected sale price and subtracting any liens with priority over the federal tax lien, along with closing costs.³ You’ll submit a proposed escrow agreement showing how the proceeds will be distributed at closing.

There’s a variation worth knowing about. The IRS can allow the sale and require that the net proceeds sit in an escrow fund that preserves the government’s claim. The money replaces the property as collateral, and the IRS keeps the same priority it had against the house, just now against a pile of cash.²

You’re Underwater

If the debts ahead of the IRS lien (your mortgage, mostly) exceed the property’s fair market value, the government’s interest has no value. The IRS can issue a discharge acknowledging it has nothing to gain by blocking the sale.³ You still owe the tax debt and the lien remains on your other assets, but the property can be sold.

You Own Other Property Worth Double the Debt

If you own other property worth at least twice the combined amount of your unpaid tax liability and any senior liens, the IRS can discharge the specific property you’re selling while keeping the lien on everything else.² Uncommon for most homeowners, but relevant if you hold other high-value real estate.

You Post a Deposit or Bond

You can force a discharge by depositing cash or posting a surety bond equal to the government’s interest in the property. Unlike the other paths, where the IRS exercises discretion, this one is mandatory: the IRS must issue the certificate once you post the required amount.² The deposit substitutes cash for the property as security while you resolve the underlying debt.

How to Apply

You file Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien.⁴ The form asks for:

Property details: address, legal description, and fair market value with supporting documentation such as a recent appraisal or comparable sales analysis.
Transaction terms: proposed sale price, expected closing date, and buyer information.
Existing encumbrances: all mortgages, liens, and judgments against the property, with amounts owed and priority positions.
Tax lien information: copies of your Notice of Federal Tax Lien, including the tax periods and amounts shown on the filing.
Financial statements showing your current situation, which the IRS uses to evaluate how the sale affects its ability to collect.

If you’re asking for a discharge based on partial payment or an escrow arrangement, include a proposed escrow agreement and a closing statement showing how sale proceeds will be distributed.³

Mail the completed application to the IRS Advisory Consolidated Receipts office at 7940 Kentucky Drive, Florence, KY 41042.⁵ Check Form 14135’s instructions for the correct internal stop number. Submit at least 45 days before your planned closing date.⁶

What Happens After You Apply

An IRS advisory group reviews the application and may contact you for additional documentation. Internal guidelines call for a recommendation within 30 calendar days of receiving a complete application, or within 14 days if a foreclosure sale is pending.⁷ That clock starts when they have everything they need, not when you first mail the package. If your application is incomplete, the clock resets each time they request more information.

In practice, the recommended 45-day lead time is tight. Missing documents, questions about property value, or internal backlogs can push the process beyond that window. Coordinate with your closing agent early, and warn your buyer that the date may shift. Once the IRS approves your request, the certificate of discharge is issued, and once it’s filed in the same office where the lien notice was recorded, it becomes legally conclusive.²

If the IRS Denies the Discharge

A denial doesn’t end the sale. You can challenge it through the IRS Collection Appeals Program by filing Form 9423, Collection Appeal Request. Before filing the formal appeal, you must request a conference with the collection employee’s manager. If that conference doesn’t resolve the issue, you have just two business days to notify the IRS that you plan to appeal, and then three business days after the conference to get Form 9423 postmarked or received. If the manager never contacts you within two business days of your conference request, you can submit Form 9423 directly, but it must be postmarked within four business days of your original request.⁸ Miss these deadlines by a day and the IRS can resume collection activity without further review.

If you received a formal Collection Due Process notice about the lien filing itself, Form 12153 lets you request a hearing with the IRS Independent Office of Appeals, which can address the underlying liability, propose collection alternatives such as an installment agreement or offer in compromise, and request that the lien be withdrawn entirely.⁹ A timely CDP hearing request also suspends most collection activity while the appeal is pending.

Costs

The IRS doesn’t charge a fee to process a discharge application. Your out-of-pocket costs come from the supporting work: a property appraisal to document fair market value, title searches to identify all encumbrances, and county recording fees to file the certificate once issued (typically in the range of $10 to $40, varying by jurisdiction). If you hire a tax professional to prepare and negotiate the application, expect hourly rates between $200 and $600, or flat fees ranging from roughly $1,000 to $6,500 depending on complexity and location. The simpler the math (full payoff from sale proceeds, no disputes about value), the less professional help you’ll need.

Two Things That Change the Calculation

If you’re refinancing rather than selling, you don’t need a discharge. You need a certificate of subordination, filed on Form 14134, which asks the IRS to let a new lender’s mortgage take priority over the tax lien while the lien stays on the property.¹⁰

And before you commit to the discharge process, check your collection statute dates. The IRS generally has 10 years from the date it assesses a tax liability to collect, and after that window closes the lien expires and the IRS should release it. Certain actions pause that clock: filing for bankruptcy, submitting an offer in compromise, requesting a Collection Due Process hearing, or leaving the country for extended periods. An installment agreement can also extend the collection period if you agreed to that in writing.¹¹ If you’re close to expiration on all the tax periods behind your lien, verify the actual dates for each year’s assessment before you decide whether to apply.

1
Office of the Law Revision Counsel. 26 U.S. Code 6321 – Lien for Taxes
2
Office of the Law Revision Counsel. 26 USC 6325 – Release of Lien or Discharge of Property
3
Internal Revenue Service. Instructions on How to Apply for a Certificate of Discharge From Federal Tax Lien
4
Internal Revenue Service. Form 14135 – Application for Certificate of Discharge of Property From Federal Tax Lien
5
Internal Revenue Service. Collection Advisory Offices Contact Information
6
Internal Revenue Service. How to Apply for a Certificate of Subordination of Federal Tax Lien
7
Internal Revenue Service. 5.12.10 Lien Related Certificates
8
Internal Revenue Service. Form 9423, Collection Appeal Request
9
Internal Revenue Service. Form 12153, Request for a Collection Due Process or Equivalent Hearing
10
Internal Revenue Service. Form 14134 – Application for Certificate of Subordination of Federal Tax Lien
11
Office of the Law Revision Counsel. 26 USC 6502 – Collection After Assessment