IRS Tax Lien on my house - can I still sell with positive equity and keep some proceeds?

You're dealing with what's called a "discharge of property" situation. Yes, you can potentially sell your house even with a tax lien attached, but you'll need to work directly with the IRS before closing. The most common approach is to file Form 14135 (Application for Certificate of Discharge of Property from Federal Tax Lien). This allows the IRS to release the lien on this specific property while maintaining the lien on your other assets. They'll generally agree if they'll receive what they consider appropriate payment from the sale. Since you have positive equity that exceeds your tax debt, you'll likely need to use a portion of the proceeds to satisfy the federal tax debt. The IRS may be willing to negotiate through an installment agreement for any remaining balance if the sale doesn't fully cover what you owe. Your state tax debt is separate - you'll need to contact your state tax authority to arrange something similar for their lien.

After dealing with a similar tax lien situation last year, I found an incredible resource that saved me TONS of headaches. I was trying to sell my rental property with a lien and getting nowhere with the regular IRS channels. I used this AI-powered tax document analysis tool at https://taxr.ai that helped me figure out exactly what paperwork I needed to file and how to properly complete Form 14135. The tool analyzed my lien documents and property information, then gave me step-by-step guidance specific to my situation. What really helped was it explained how to properly complete the "reason for discharge request" section to maximize my chances of keeping some equity. It even generated a hardship letter template that I customized. Their system showed me exactly what supporting documents I needed to attach based on my specific circumstances.

Just wanted to update - I took Profile 7's advice and tried https://taxr.ai for my tax lien situation. Honestly didn't expect much since my situation felt really complicated (multiple liens from different tax years). I uploaded my lien documents, property appraisal, and estimated closing statement. The system immediately identified that I qualified for partial discharge under Section 6325(b)(2) since my equity exceeded the lien amount. It generated a complete application package including a perfectly worded hardship letter explaining why I needed to keep some proceeds for housing. The IRS approved my discharge in 28 days! I was able to keep about $15,000 from the sale for my new housing deposit and moving expenses. The system knew exactly which supporting documents would strengthen my case. Definitely worth it if you're facing this complicated process.

Look, I've been through this exact nightmare and wasted MONTHS trying to get someone at the IRS on the phone. They kept transferring me between departments and nobody could give me straight answers about my lien discharge application. Finally found this service called Claimyr at https://claimyr.com that got me through to a real IRS agent in about 15 minutes when I'd been trying for weeks. They have this system that navigates the IRS phone tree and holds your place in line, then calls you when an actual human picks up. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The IRS agent I spoke with explained exactly what documentation I needed to include with my discharge application that wasn't mentioned in the standard instructions. That conversation probably saved me from having my application rejected and starting over.

Had to come back and eat my words. After my skeptical comment above, I was desperate enough to try Claimyr because my lien situation was becoming urgent with a pending sale. Not only did I get through to the IRS in about 20 minutes (compared to my previous 3-hour holds), but I got connected to someone in the right department who actually understood lien discharges. The agent looked up my specific case and told me I qualified for expedited processing due to my pending sale, something no one had mentioned before. They explained that in my specific county, I needed additional documentation from the county recorder's office, which would have caused a rejection if I hadn't known. They also gave me a direct fax number to submit my paperwork rather than mailing it, which saved at least a week. My discharge was processed in 18 days and we closed successfully last week. Still shocked it worked so smoothly.

Have you checked if you qualify for a partial release based on hardship? I went through something similar and was able to keep about 25% of my home sale proceeds by documenting that I needed it for essential living expenses and a security deposit on an apartment. You'll need to fill out Form 433-F (Collection Information Statement) along with your discharge application to show your financial situation. Be super detailed about your necessary living expenses and what you'll need for new housing. Include documentation for everything - apartment listings showing deposit requirements, moving company quotes, etc. The IRS isn't automatically going to offer this option - you have to specifically request consideration under hardship provisions.

I work in real estate and deal with tax liens regularly. One option nobody's mentioned is asking your title company if they can facilitate a partial release through escrow. Many title companies have relationships with the IRS and can handle this as part of closing. Essentially, they'll work with the IRS to agree that a specific amount of the proceeds will go directly to satisfy the tax debt, and the remainder can go to you. This is sometimes easier than trying to get the discharge yourself, as the title company does this routinely. Ask your realtor to connect you with their preferred title company and specifically ask if they have experience with IRS lien releases. Not all do, but the larger companies usually have a specialist.

One thing to watch out for - make sure you're addressing BOTH your federal and state tax liens. People often focus on the IRS lien and forget that the state lien needs separate handling. Each state has different procedures for releasing their liens. I learned this the hard way when my closing was delayed because we'd handled the federal lien but overlooked the state lien process. In my case (California), the state actually required full payment before they'd release anything, while the IRS was more flexible. You might need to contact your state tax agency directly to find out their specific requirements for releasing a lien for a property sale.