Updated: November 6, 2026 · By Mark Dietel, Broker/Owner, Mark Dietel Realty · 6-minute read
Quick answer: Yes. Mark Dietel Realty tells Indiana sellers that a federal tax lien does not block a sale. When the price covers the tax debt, the IRS is paid from your proceeds at closing. When it does not, you ask the IRS for a certificate of discharge at least 45 days before closing.
What we analyzed: IRS Publication 783 (Rev. 6-2010, archived copy), Internal Revenue Code section 6325 and the IRS page on federal tax liens, read on November 6, 2026. The IRS updates forms over time, so confirm current versions with the IRS or a tax attorney.
The IRS discharge application asks for a signed sales contract, a title report and a proposed closing statement. Your buyer is under contract before the IRS answers, so a lien sale needs a closing date with room in it. This guide follows our overview, can you sell a house with a lien on it in Indiana?
Key takeaways
- A federal tax lien is a claim on your house, and it leaves your right to sell in place.
- If the sale pays the IRS in full, the lien is released after closing, with no extra application.
- If the sale cannot pay the IRS in full, a certificate of discharge frees the house, and the IRS decides whether to grant it.
- The IRS asks for the application at least 45 days before the transaction date, so the closing date comes from the IRS timeline.
Can you still sell if the IRS has filed a lien on your house?
Yes. A Notice of Federal Tax Lien is a public document that tells creditors the government has a claim on your property. The IRS says that claim covers real estate, personal property and financial assets. It leaves your right to sell in place, and a buyer's title company will want the claim paid or released.
The lien exists after the IRS assesses the tax, sends a Notice and Demand for Payment, and the balance goes unpaid. Our read is that a recorded notice will show up in the title search. That is why we order a preliminary search before a house is listed.
How does the IRS get paid when you sell?
In most sales, from your proceeds at closing. You get a payoff figure from the IRS, the title company pays it from your sale money, and the IRS releases the lien. Under Internal Revenue Code section 6325(a), the IRS issues the release within 30 days after the debt is paid in full.
What is a certificate of discharge, and when do you need one?
A certificate of discharge removes the federal tax lien from one property, here your house, so the buyer takes it free of the IRS claim. You apply on IRS Form 14135 under Publication 783, at least 45 days before the transaction date.
A discharge does not erase the tax debt, and the lien stays attached to your other property until the debt is paid. The IRS decides which route fits, based on how the sale price compares with the debts ahead of it. The 45-day window comes from Publication 783, Rev. 6-2010, in an archived copy, so confirm the current revision with the IRS before you file. The table sorts the routes.
Discharge routes under Internal Revenue Code section 6325(b)
| Route | Code section | When it fits | What the IRS asks for |
|---|---|---|---|
| Value left behind | 6325(b)(1) | The property that stays under the lien is worth at least twice the tax debt plus the liens ahead of it | No payment |
| Partial payment | 6325(b)(2)(A) | The sale pays the IRS an amount at least equal to its interest in the house | An agreed amount, paid before the certificate issues |
| No value to the IRS | 6325(b)(2)(B) | Debts ahead of the IRS, such as the mortgage, are larger than what the house sells for | No payment, with an escrow agreement submitted |
| Proceeds held in escrow | 6325(b)(3) | Sale money is held in an approved escrow account, and the IRS keeps its priority claim on it | The IRS interest placed in escrow |
| Deposit or bond | 6325(b)(4) | The owner does not owe the tax, for example a co-owner | A deposit or bond equal to the IRS interest |
If the IRS denies an application, it sends Form 9423 and Publication 1660 with an explanation. Those describe appeal rights, and a tax attorney should handle that step.
What does the IRS ask for with the application?
Publication 783 lists the attachments. The main ones are a copy of the lien, the sales contract, a current title report, a proposed closing statement, and a professional appraisal plus a second valuation. Do not send payment with the application. The IRS tells you when to pay.
- A copy of the federal tax lien, or its System Lien Identification Number if you are not the taxpayer.
- A copy of the sales contract or purchase agreement.
- A current title report, or a list of the liens ahead of the IRS with each holder, amount and date.
- A proposed closing statement, or an itemized list of the costs of the sale.
- An appraisal by a disinterested third party, plus one more valuation such as a county valuation.
- A declaration signed under penalties of perjury.
How do you fit the IRS timeline into a sale?
Plan the closing date around the IRS. Request the discharge at least 45 days before closing, and expect to attach a signed contract, so tell your buyer about the lien before they sign. An attorney can write contract language that gives the closing room.
Our read is that in Central Indiana a recorded federal tax lien sits with the county recorder, so a title search on a Johnson County or Marion County house should find it along with the mortgage. That puts the lien in front of you before a buyer's title work does. Our guide on choosing your closing date when selling in Indiana covers the calendar side. Here is the working order.
- Order a title search and confirm the lien amount and every lien ahead of it.
- Call a CPA or tax attorney before you list. They lead on the IRS.
- Get an IRS payoff figure and a written net sheet that includes it.
- Sign a contract that gives the IRS timeline room, with the buyer told about the lien.
- File Form 14135 with the contract, title report and closing statement attached.
- Close once the IRS has the payment it agreed to or has issued the certificate.
What does a federal tax lien sale look like in Central Indiana?
Here is a hypothetical example, not a real sale. A homeowner in Greenwood sells for $300,000 and owes $180,000 on the mortgage. Both scenarios start from the same house. Only the tax lien differs.
Hypothetical Greenwood sale with a federal tax lien (illustration only)
| Line | Scenario A | Scenario B |
|---|---|---|
| Sale price | $300,000 | $300,000 |
| Mortgage payoff | $180,000 | $180,000 |
| Left after the mortgage, before other costs | $120,000 | $120,000 |
| Federal tax lien balance | $40,000 | $150,000 |
| Other costs of the sale, including your negotiated agent compensation (enter yours) | From your net sheet | From your net sheet |
| Lien after closing | Paid in full from proceeds and released | At least $30,000 left before other costs, still on your other property |
In Scenario A, the money left after the mortgage covers the lien, so the title company pays it at closing and the IRS releases it. In Scenario B, it falls short, so the seller would file for a discharge at least 45 days before the Greenwood closing and the IRS would decide how much it takes from the sale. The remaining debt follows the seller. Your CPA or tax attorney should model your real numbers.
When this guide doesn't apply
This guide covers one situation: you own an Indiana house, the IRS has filed a federal tax lien, and you want to sell. It does not fit every case.
- State tax claims, such as Indiana Department of Revenue: they follow state rules, so ask an attorney.
- A bankruptcy case is open: the court and trustee may have to approve a sale, and your attorney leads.
- Someone else owns the house, or the lien is on a co-owner or a business: who owes the tax changes which discharge route fits, so ask a tax attorney.
- The mortgage is larger than the house is worth: see I owe more than my house is worth in Indiana.
We are a real estate team. We can show you what a lien does to a sale and what the numbers look like. How to settle or reduce a tax debt is a question for a CPA or a tax attorney.
What to do next
If you have found a lien and have not signed a contract yet, call us before you list. We will order the title search, put the IRS payoff in a written net sheet and build a closing calendar around the IRS timeline. Bring any IRS notices and your mortgage statement.
Prefer to talk? Call (317) 426-9911. Mark Dietel Realty has offices in Southside Indianapolis, Greenwood and Bloomington.
Read next
- Can you sell a house with a lien on it in Indiana?
- I owe more than my house is worth in Indiana: now what?
- What is a seller net sheet in Indiana and what goes into it?
- How do I choose a title company in Indianapolis?
Frequently asked questions
Can I sell if I cannot pay the whole IRS debt?
Often yes, but the IRS has to agree to release the house from its lien. The discharge routes in section 6325(b) cover cases where the sale pays only part of the debt. The IRS decides, and the remaining debt stays with you. A tax attorney should lead.
How long after I pay does the IRS release the lien?
Within 30 days. Internal Revenue Code section 6325(a) requires a certificate of release within 30 days after the debt, with interest, is paid in full or becomes unenforceable. Ask the title company how it will confirm the release for your buyer.
What is the difference between a discharge and a release?
A release ends the lien entirely after the debt is paid. A discharge removes the lien from one property, such as your house, while the lien stays on your other property. A sale that does not pay the debt in full needs a discharge.
Will a federal tax lien show up in the title search?
Our read is yes, if the notice was recorded. Recorded federal tax liens sit with the county recorder, as we explain in our overview of liens on an Indiana house. The title company runs that search for the buyer's title insurance.
This is general information, not legal or tax advice. Confirm your situation with an attorney, a CPA or the IRS. Dollar figures in the worked example are hypothetical.
Mark Dietel Realty - offices in Indianapolis (Southside), Greenwood and Bloomington, Indiana.
Sources
- IRS Publication 783, Instructions on How to Apply for Certificate of Discharge of Property From Federal Tax Lien (Rev. 6-2010, archived copy): https://webarchive.library.unt.edu/web/20130214052505/http://www.irs.gov/pub/irs-pdf/p783.pdf
- Internal Revenue Code section 6325, release of lien or discharge of property (Cornell Legal Information Institute): https://www.law.cornell.edu/uscode/text/26/6325
- IRS, Understanding a federal tax lien: https://www.irs.gov/businesses/small-businesses-self-employed/understanding-a-federal-tax-lien
- Forms and publications named in this guide (Form 14135, Form 9423, Publication 1660) are referenced in Publication 783. Subordination is covered in IRS Publication 784, which the IRS lien page above points to.
