Tax lien

From Academic Kids

A tax lien is a lien imposed on a property by a government to secure payment of taxes owed.

In the United States, many state and county governments sell these liens to investors (who are repayed with interest when the taxpayer pays the amount due, or who can foreclose on the property, essentially acquiring it for the tax due plus legal fees, if the taxpayer continues in delinquency). During periods of recession, tax liens are seen by many investors as a way to gain a guaranteed and relatively high interest rate (since penalties may be forwarded to them when the tax is paid) at the same low to nonexistent risk as other government obligations.

Meanwhile, for the government, tax liens allow them a source of guaranteed revenue even when taxpayers are delinquent (the cost of the sale and paperwork are typically added to the price of the lien).

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