Can Unpaid Taxes Keep Me From Buying a Home?
According to Bloomberg.com, local governments across the US collect about $500 billion a year in residential property taxes by applying a set tax rate to the market value of every home. This makes it very important to correctly determine the value of every property. MarketWatch reveals that despite this amount of tax collected each year, Individual taxpayers, businesses and corporations collectively owed $688 billion in unpaid taxes for the returns due at the end of 2021.
If you are thinking of buying a home, you might be asking yourself if you can buy a house if you owe taxes. A tax law firm in Florida explains that unpaid taxes can be a barrier when it comes to owning a house, because the Internal Revenue Service (IRS) could come after your home if you did not pay your taxes or debts prior to the deadline.
Let’s talk about what will happen and how a tax lawyer can help you avoid this kind of risk so you can finally become a homeowner.
People Also Read?
Impact of Unpaid Taxes on Home Buying
When you’re looking to purchase a property, the last thing you want is to be hit with unexpected financial burdens. Delinquent taxes both on your side as the home buyer and on the side of the seller can lead to issues with the title of the property you’re interested in. This can cause delays in the buying process or, even worse, prevent the sale from going through entirely.
Estate planning lawyers from Tierney Law Group say that while debts and unpaid taxes are not directly passed on to heirs, if there is money in an estate, the IRS is the first one getting paid. This is something that you should look at too when buying a house. Make sure that its property tax payments are up to date.
Don’t forget that lenders often check your financial history too, including any outstanding tax debts you may have before they lend you money. Having unpaid taxes can raise red flags for lenders and affect your eligibility for a mortgage. It may result in higher interest rates or even the rejection of your loan application.
To avoid these complications, ensure that all taxes on the property you wish to purchase are up-to-date. Before finalizing any real estate transactions, make sure to conduct thorough due diligence to uncover any potential tax issues.
Risks of Owning Property with Delinquent Taxes
Neglecting property taxes can expose you to significant risks as a homeowner. One of the primary risks of owning property with delinquent taxes is the possibility of losing your home through tax foreclosure. If you fail to pay property taxes, the government can place a tax lien on your property, and if the debt remains unpaid, they’ve got the right to foreclose on the property to recoup the taxes owed. This means you could lose your home and any equity you have built up in it.
Another risk is the potential damage to your credit score. Unpaid property taxes can lead to a tax lien being reported on your credit report, which can significantly lower your credit score. A lower credit score can make it more challenging to secure loans or credit in the future, impacting your financial stability.
People Also Read?
Owning property with delinquent taxes may also result in additional penalties, interest, and fees accruing over time, further increasing your financial burden. It’s necessary to address delinquent property taxes promptly to avoid these risks and protect your homeownership.
Options for Resolving Unpaid Taxes
To address delinquent property taxes, you can explore other options available to resolve the outstanding payments efficiently. One common option is setting up a payment plan with the tax authorities. This allows you to pay off the owed taxes in manageable installments over a period of time.
Another option is to negotiate a settlement with the tax authorities, where you may be able to pay a reduced amount to satisfy the debt. You could also consider applying for a tax abatement or exemption if you believe you qualify for relief based on specific criteria such as age, disability, or income level.
In some cases, it might be possible to request penalty waivers or reductions if you can demonstrate a valid reason for falling behind on your tax payments. Exploring these options can help you address your unpaid taxes and work towards resolving them in a way that fits your financial situation.
Precautions When Buying a Home with Tax Debt
When considering purchasing a home with tax debt, it’s important to prioritize understanding the potential risks and taking the necessary precautions to safeguard your investment.
Start by obtaining a copy of your credit report to review any outstanding tax debts. If you find any discrepancies or unpaid taxes, contact the relevant tax authorities to understand the details of the debt and work towards resolving it. Be prepared for potential challenges such as higher interest rates or limited loan options due to the outstanding tax liability.
Seek professional help from a tax advisor or accountant to effectively handle complicated tax matters. He or she can provide insights on the best course of action to clear your tax debt when buying a home. Ensure that all tax returns are filed and up-to-date to avoid any further complications in the home-buying process.
People Also Read?
Make sure that you have a clear understanding of the repayment terms and any potential penalties associated with the tax debt. You can make a more informed decision and protect your investment in the long run by taking these precautions and being proactive in addressing the tax issues.
Conclusion
Don’t let unpaid taxes stand in the way of your dream home. Take steps to resolve any tax issues before buying to avoid potential risks and complications. You can ensure a smoother homebuying process and protect your investment in the long run by proactively addressing delinquent taxes.
