States That Sell Tax Lien Certificates: Auctions, Rates, Risks

About 30 states let county governments sell tax lien certificates to private investors, with the exact count depending on whether hybrid redeemable-deed states get lumped in. The states that sell tax lien certificates in the pure sense — where you buy the delinquent tax debt, not the property — are Alabama, Arizona, Colorado, Florida, Illinois, Indiana, Iowa, Kentucky, Maryland, Missouri, Montana, Nebraska, New Jersey, South Dakota, West Virginia, and Wyoming. Several other states run hybrid or redeemable-deed systems that share features with lien sales. The rest are tax deed states, which don’t offer certificates at all.

Pure Tax Lien Certificate States

In these states, the county issues a certificate showing you paid the back taxes on someone else’s property. The owner then owes you that amount plus interest. You don’t touch the property unless the owner never pays and you foreclose later.

Alabama. Counties may sell tax lien certificates as an alternative method for collecting delinquent property taxes.¹
Arizona. County treasurers sell tax liens on delinquent parcels and can later foreclose if the owner doesn’t pay.²
Colorado. Counties hold annual lien sales, and investors bid down the interest rate they’re willing to accept.
Florida. Tax collectors sell certificates on all properties with unpaid taxes, with bidding conducted electronically in many counties.³
Illinois. Counties sell tax lien certificates through an annual process, and interest rates vary by county.
Indiana. The state authorizes counties to sell tax sale certificates on delinquent properties.
Iowa. County treasurers hold annual sales on the third Monday in June, selling certificates to the bidder willing to accept the smallest percentage interest in the parcel.⁴
Kentucky. The state places liens on delinquent property that remain enforceable for up to eleven years.
Maryland. Counties and Baltimore City sell tax lien certificates, with rules varying by jurisdiction.
Missouri. Delinquent property taxes result in lien certificates sold to investors at county auctions.
Montana. County treasurers attach tax liens to delinquent properties, and outside investors can take an assignment of the lien by paying all taxes, penalties, interest, and costs owed.
Nebraska. Counties issue tax sale certificates, and the holder can later foreclose through district court in the same manner as a mortgage foreclosure.⁵
New Jersey. Municipalities sell certificates of tax sale on delinquent parcels, and unsold certificates may later be sold through private sale.⁶
South Dakota. Counties sell tax lien certificates on delinquent parcels annually.
West Virginia. The state sells tax liens through a sheriff’s sale process.
Wyoming. County treasurers sell certificates on properties with unpaid taxes.

These sales happen at the county level, not through a centralized state office. Each county treasurer or tax collector sets its own auction dates, publishes its own property listings, and manages its own registration. Pre-sale listings typically include the parcel identification number and the total amount owed in taxes, penalties, and interest.

Hybrid and Redeemable Deed States

Some states don’t fit either the pure lien or the pure deed category. In a hybrid or redeemable-deed system, the auction buyer receives a deed to the property rather than a certificate for the debt, but the original owner keeps a right to buy the property back during a redemption window. If the owner redeems in time, the deed holder gets their money back plus a statutory penalty or interest. If not, the buyer keeps the property.

Georgia is a clear example. The purchaser at a tax sale acquires what’s called a “defeasible title,” which becomes permanent only if the owner fails to redeem within twelve months of the sale.⁷ Texas works similarly but with steeper penalties. Homestead and agricultural property owners get two years to redeem, paying the buyer’s full bid plus a 25 percent premium in the first year or 50 percent in the second. For non-homestead property, the redemption window shrinks to 180 days with a 25 percent premium cap.⁸

Connecticut, Delaware, Hawaii, Louisiana, Massachusetts, Pennsylvania, Rhode Island, and Tennessee also use variations of redeemable-deed systems, though redemption periods and penalty rates differ in each. Because these states transfer a form of ownership at auction rather than just a debt position, the legal exposure looks different than in a pure lien certificate state, and investors may take on property-related responsibilities during the redemption period.

States That Don’t Sell Tax Lien Certificates

The remaining states skip the lien certificate and sell the property itself at auction, transferring ownership to the winning bidder with no redemption period or only a very short one. If you’re specifically looking for tax lien certificates, these states won’t have them: Alaska, Arkansas, California, Idaho, Kansas, Maine, Michigan, Nevada, New Hampshire, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Utah, Virginia, Washington, and Wisconsin. Minnesota and Mississippi handle tax sales in ways that don’t map cleanly onto either model, so check the specific county’s process before assuming how the sale works.

How Tax Lien Auctions Work

Auction formats vary by state and sometimes by county. Three methods are common.

Bid-down interest rate. The auctioneer starts at the state’s maximum allowable rate, and investors compete by accepting progressively lower rates. The bidder willing to earn the least interest wins. This is common in Florida, Arizona, and several other states. In competitive markets, winning rates can drop to fractions of a percent.
Premium bidding. Investors bid a cash amount above the taxes owed. The highest bidder wins the certificate but earns interest only on the base tax amount, not on the premium. The premium is often non-refundable if the owner redeems.
Rotational or random selection. An official works down the list and either draws bidder numbers at random or cycles through registered bidders in a fixed rotation. When your number comes up, you accept or decline at the statutory rate. There’s no competitive bidding on price or rate.

Many counties run auctions online now, though some still hold live sales at the courthouse. Iowa’s statute authorizes the county treasurer to hold the annual sale on the third Monday in June, continuing from day to day until all parcels are sold.⁴ Florida allows electronic sales with proxy bidding.³ Winning bidders typically must pay in full via wire transfer or certified check within 24 hours of the sale closing.

Certificates that go unsold at auction are usually “struck off” to the county at the maximum interest rate. In some states, these leftover certificates then become available for purchase at that maximum rate through what’s sometimes called an over-the-counter sale. For investors who missed the auction or dislike competitive bidding, this can be a simpler entry point.

Interest Rates, Redemption, and Expiration

The return on a tax lien certificate comes from the interest the property owner must pay to clear the lien. Each state sets a maximum rate by statute, and in bid-down states, competition often pushes actual rates well below the cap. Florida’s statutory maximum is 18 percent per year.⁹ Arizona caps interest at 16 percent per year, calculated as simple interest and prorated monthly.¹⁰

The redemption period is the window during which the owner can pay off the lien and reclaim clear title. It commonly runs from one to three years. Nebraska requires the certificate holder to wait at least two years before initiating foreclosure, or three years for non-vacant, non-abandoned property.⁵ You earn interest during that window but have no control over the property.

Certificates also expire. Florida voids any certificate after seven years if no tax deed application has been filed.¹¹ Arizona gives holders ten years before the lien expires and becomes void.¹² Missing these deadlines means losing your entire investment.

Paying Subsequent Taxes

Property taxes keep accruing after a lien is sold. Each year the owner remains delinquent, new taxes come due. In most states, the existing certificate holder can pay these subsequent taxes and add the amount to the lien, earning interest on the new payment at the same rate as the original certificate. This protects your position, because if you don’t pay, the county may sell a new certificate to a different investor and create competing claims on the same property. Paying subsequent taxes increases your total outlay but strengthens your claim if the property eventually goes to foreclosure.

Risks to Weigh Before Bidding

The interest rates are real. So are the ways to lose money. Most of the trouble starts with what you don’t know about the property before you buy.

Property Condition and Value

You’re buying a debt secured by real estate you may never have seen. The parcel behind a delinquent tax bill could be a vacant lot in a flood zone, a condemned structure, or land with environmental contamination. If you foreclose, you own whatever problems come with the property. Environmental cleanup liability under federal law can attach to property owners regardless of who caused the contamination, so a $2,000 tax lien can lead to six-figure remediation costs. A title search, which can cost anywhere from $50 to several hundred dollars, will reveal existing mortgages, other liens, and ownership history. Driving by the property or reviewing it on satellite imagery is the minimum.

Bankruptcy and the Automatic Stay

If the property owner files for bankruptcy before you foreclose, the federal automatic stay freezes your ability to enforce the lien. Filing a petition immediately prohibits any act to enforce a lien against property of the bankruptcy estate.¹³ Your lien still exists, and property tax liens generally maintain priority over mortgages and other secured debts, but foreclosure has to wait until the stay lifts, which can push your timeline out by months or years.

Quiet Title After Foreclosure

Even after you successfully foreclose and receive a deed, that deed alone may not be enough to sell the property or obtain title insurance. Most title companies won’t insure a property acquired through a tax sale without a quiet title action, a lawsuit that formally eliminates any lingering claims from the previous owner. If uncontested, this typically takes 60 to 90 days and costs additional legal fees. Skip it and your ownership stays vulnerable to challenge, and the property becomes nearly impossible to resell.

Registration, Documentation, and Taxes

Before you can bid, every county requires some form of registration. You’ll need to submit IRS Form W-9, which provides your taxpayer identification number so the county can report interest payments to the IRS.¹⁴ A valid government-issued ID is standard. County registration forms will ask whether you’re bidding as an individual, a business entity, or a trust.

Many counties also require a pre-sale deposit or financial pre-authorization to prove you can pay for what you win. Some counties charge a flat registration fee; others require a hold on a credit card or a percentage of your intended bidding total. Deposits are usually refundable if you don’t win anything, but read the terms because some jurisdictions keep a portion as a non-refundable processing fee. Winning and failing to pay within the required window means forfeiting the deposit and possibly being barred from future sales in that county.

Interest earned on tax lien certificates is taxable as ordinary interest income. The county or its auction platform will issue you a Form 1099-INT if the interest totals $10 or more during the tax year.¹⁴ Even if the amount falls below the reporting threshold, you’re still required to report it. If you end up foreclosing and acquiring the property, you’re then holding real estate with a cost basis and potential capital gains implications when you sell.

1
Alabama Legislature. Alabama Code 40-10-180 – Purpose; Choice of Remedy by Tax Collecting Official
2
Arizona Legislature. Arizona Revised Statutes 42-18101 – Sale and Foreclosure of Tax Liens
3
Florida Senate. Florida Code 197.432 – Sale of Tax Certificates for Unpaid Taxes
4
Iowa Legislature. Iowa Code Chapter 446 – Annual Tax Sale
5
Nebraska Legislature. Nebraska Revised Statute 77-1902 – Tax Deed; Right of Holder to Foreclosure
6
Justia. New Jersey Revised Statutes 54-5-113 – Private Sale of Certificate of Tax Sale by Municipality
7
Justia. Georgia Code 48-4-40 – Persons Entitled to Redeem Property
8
State of Texas. Texas Tax Code 34.21 – Right of Redemption
9
The Florida Legislature. Florida Statutes 197.172 – Interest Rate; Calculation and Minimum
10
Arizona Legislature. Arizona Revised Statutes 42-18053 – Interest on Delinquent Taxes
11
The Florida Legislature. Florida Statutes 197.482 – Expiration of Tax Certificate
12
Arizona Legislature. Arizona Code 42-18127 – Expiration of Lien and Certificate
13
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
14
Internal Revenue Service. About Form W-9, Request for Taxpayer Identification Number and Certification