Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Tax Lien

What it is:

A tax lien is a claim placed on a piece of real estate by a tax authority due to a taxpayer's failure to pay taxes.   

How it works (Example):

When a taxpayer fails to pay either income taxes or property taxes, the taxing authority to whom the debt is owed may place a lien against the taxpayers property to ensure that the tax liability will eventually get paid. A property with a tax lien cannot be sold by the owner, which prevents the owner from walking away from the tax liability.

Why it Matters:

Tax liens are highly effective for tax enforcement since the property holder can not sell a property that has a lien on it. The taxing authority will keep a lien on the property until the tax liability is paid. 

Tax liens can be purchased by investors as an investment. Such investments are considered solid since they are tied to a hard asset