What Happens If You Don't Pay Property Taxes? Tax Liens in Texas (2024)

Homebuyers in the Lone Star State sometimes wonder what happens if you don't pay property taxes in Texas. Failure to remit the taxes owed on real property in the state can kick off a series of events that would otherwise be avoidable with timely payment.

Delinquent property taxes in Texas typically result in the enforcement of a tax lien on the property in order to collect payment. Penalties, interest, and fees begin to accumulate. In some cases, homeowners with unpaid taxes can even lose their homes to foreclosure.

Find out how to avoid such tax liens in Texas and what to do if you have one on your home. Discover your options for avoiding foreclosure, and learn how to redeem your property if it does enter the tax sale process.

Can You Lose Your House by Not Paying Property Taxes?

Yes. Real estate owners in Texas must pay taxes on their property. Failure to pay property taxes on time results in the taxpayer's account becoming delinquent and subject to severe penalties and interest. The overdue amount, plus all accrued liabilities, becomes a lien on the property. In essence, this tax lien makes the property collateral for the debt. Once a tax lien is enforced, taxing districts in Texas have the right to take all actions necessary to collect, including foreclosure on the property and selling it at auction.

Tax Liens in Texas

In addition to being subject to penalties and interest on past due amounts, Texas homeowners with delinquent taxes face the prospect of having a tax lien placed on their property. Tax liens in Texas allow the local taxing authorities to enforce the collection of past due amounts owed on real property, plus any accrued interest, penalties, and legal fees.

Taxpayers with delinquent property tax accounts will receive a Notice of State Tax Lien, informing the property owner that a lien has been placed on their property. The lien remains in effect until the past due amounts are paid, or the parties otherwise come to an agreement or settlement.

Penalties for delinquent property taxes stack up quickly:

• 6% penalty as soon as the taxes become delinquent on Feb 1
• 1% additional penalty each following month the taxes remain unpaid
• on July 1, the total penalty jumps to 12% (adding 2% instead of 1%), and then resumes at a rate of 1% per month
• collection and attorney fees of up to 20% at the time the taxes are collected

Homeowners should be aware that the existence of a tax lien makes it difficult, if not impossible, to sell their property until the debt is paid in full. If the total amount due isn't paid, the state ultimately has the right to seize the property and sell it at auction in order to settle the back taxes.

How Long Can You Go Without Paying Property Taxes in Texas?

In Texas, the local tax offices typically begin mailing bills in October. Though Texas property taxes are technically considered due upon receipt, homeowners actually have until January 31 to pay without penalty or interest. Unpaid property taxes as of February 1 are considered delinquent and are immediately assessed penalty and interest amounts.

Taxpayers with delinquent property tax accounts will receive a Notice of State Tax Lien informing them of their status. Additional penalties and interest continue to accrue until the bill is settled, either through payment of the tax bill or foreclosure and sale of the property.

There is no set period for taxing authorities to start the foreclosure process. At any time after the delinquency date of February 1, foreclosure proceedings may begin. The taxing jurisdiction may also file a lawsuit to initiate collection proceedings. If not contested, the foreclosure process can be completed in about 60 days, so time is of the essence. The longer a property owner waits to pay their delinquent account, the more expensive it becomes and the greater the chance of losing their home to foreclosure.

How to Remove a Property Tax Lien in Texas

Homeowners in Texas have a few ways to rid themselves of a property tax lien. If past due amounts are paid, such tax liens are typically released within 30 days. Otherwise, there are still a few other options available.

Texas homeowners who disagree with the assessed value of their taxable real estate have the right to protest property taxesby filing an appeal with their county appraisal district. Homeowners contesting their taxes should be prepared to present research and evidence supporting their position before informal hearings, formal review board hearings, or both. As a result of the appeal, an appraisal district may make a settlement offer, resulting in a reduced tax bill that’s easier to pay off. However, this process typically occurs in May, long before the tax bill comes in.

Certain residents may be eligible for deferred property tax payments. Texas tax code allows homeowners 65 or older, disabled persons, qualified military veterans, and surviving spouses to defer tax payments. The deferral process requires filing an affidavit with the local appraisal district. Once on file, taxes are deferred but not canceled. Any amount owed accumulates interest, and the total becomes due once the homeowner no longer owns and resides on the property. Once the affidavit for deferral is filed, pending foreclosures, collection activities, and other lien-related activity ceases immediately.

Finally, Texas taxpayers may find lenders that offer property tax loans. Such loans might help prevent the accumulation of penalties, interest, and fees and avoid the possibility of tax liens and foreclosure proceedings. In essence, a property tax loan transfers the debt from the taxing authority to your lending institution.

Can You Sell a House With a Lien On it?

Yes—technically.A homeowner unable to resolve a tax lien through other methods may still be able to sell their house. Still, it can be challenging to find a buyer. Lenders typically won't approve a loan for a property with a tax lien, meaning the sale would likely need to be a cash transaction. The buyer must also be ready, willing, and able to pay off the lien at closing unless proceeds from the sale are used to satisfy the debt.

Potential home buyers can avoid unknowingly buying a home with a tax lien on it simply by checking with their local County Clerk’s office, which will often have an online search function for real estate records. The title company involved in the home-buying process can also easily find this information.

Getting Your Home Back After a Property Tax Sale in Texas

When a property owner becomes delinquent on their taxes, a lien may be enforced, foreclosure proceedings initiated, and the property can ultimately be sold to satisfy the debt. Under most circ*mstances, though, if a Texas homeowner faces losing their property to a tax sale, they have the opportunity to get it back through the redemption process. If no effort is made to redeem the property before or after a tax sale, the taxpayer forfeits all ownership rights permanently.

Before a tax sale, a delinquent homeowner can pay off all overdue amounts, including the original property taxes, plus all accrued penalties, interest, and fees. In Texas, a homeowner is usually allowed a two-year redemption period, during which time they can reclaim the property by paying the debt. However, Section 34.21 of the Texas tax code also stipulates that the two-year redemption period is applicable only for residential homestead properties or agricultural land. Other property types are generally subject to a 180-day redemption period. The original owner is also not guaranteed the right to remain on the property during the redemption period.

Should a foreclosed property be purchased at a tax sale, the original owner can still redeem the property by repaying the purchase amount plus all other expenses incurred by the buyer, including the original taxes and penalties, as well as a hefty redemption premium—25% in the first year of the redemption period, 50% in the second year. If at all possible, homeowners with delinquent taxes should strive to pay the debt before the sale.

In the event the real estate doesn't sell, the county takes ownership and will likely continue its efforts to sell it. At this point, the original owner can redeem the property by paying the real estate's judgment amount or fair market value, whichever is lower. All other expenses incurred in the collection effort will also be included in the total amount owed.

Avoiding Tax Liens in Texas

Homeowners with delinquent accounts and property tax liens in Texas face the unfortunate prospect of growing debt as penalties, interest, and collection fees mount. In the event of foreclosure, property owners can also lose their homes to auction or tax sale.

Fortunately, as we've seen, there are several ways to avoid or remove tax liens. And, in the worst-case scenario of losing a home to foreclosure, we've also explored options for redeeming the property provided by the Texas tax code. As regrettable as a tax lien or foreclosure may be, there is recourse for Texas homeowners.