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What to Do If You Owe Back Property Taxes on Your Home?

what if i owe back taxes

Financial difficulties due to events like job loss or a health problem can leave you unable to pay your property taxes. The first thing to do if you find yourself in this situation is contact the tax collector for your city or county. You'll owe penalties and interest on late property taxes, but if you do nothing, the government can place a tax lien on your home. This can damage your credit for years, and ultimately, you could lose your house.

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Minimize the Damage

County and city tax collectors accept partial payments, so Verse Finance recommends that you pay something every time you receive a bill for back taxes, even if it's only a small sum. Municipal governments generally base interest and penalties on the amount of outstanding, overdue taxes, so the less you owe, the less extra charges you'll owe. As long as you pay something, no tax lien will be filed. This will protect your credit rating.

Make Payment Arrangements

Municipal governments often allow homeowners to pay delinquent property taxes in installments. Interest will still accrue. For example, Los Angeles County offers an "Installment Plan of Redemption." Taxpayers must pay an initial fee -- $75 as of 2015. The balance of back taxes must be paid in five monthly payments. Some jurisdictions have a yearly deadline. In Los Angeles County, the deadline is April 10. If you haven't completed the five payments by then, the plan defaults, but you can start a new five-payment arrangement to take care of the remaining amount.

There may be a waiting period, however. (Reference 2)

Request a Tax Abatement

Some local governments grant abatement of back property taxes under certain conditions. Abatement simply means the amount you owe is reduced or eliminated entirely. To qualify for an abatement, you must apply and provide some detailed information, including:

  • Income
  • Debts
  • A list of assets
  • A list of your expenses
  • In states like Maine, the local tax collector has 30 days to make a decision after you apply. If you only have enough money to cover basic living expenses, your chances of approval are good. If you've spent money on luxuries and nonessential items or if you have a lot of equity in your home, you may be denied.

    Some Other Options

    Consider taking out a loan to pay back property taxes. This can be a good move because the interest you pay on the borrowed money may be less than the interest and penalties you'll get socked with by the tax collector.

    When property taxes remain unpaid long enough, most governments put them up for sale. In a tax sale, the debt is sold to an investor. You can reimburse the investor or he can foreclose on your home. If things reach this point, ask your mortgage provider to buy the tax debt. There's a good chance your request will be approved because a foreclosure for taxes creates problems for mortgage lenders. The debt will be added to your mortgage balance.

    Category: Taxes

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