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How to buy tax liens: a beginner's guide
Tax lien investing rewards preparation more than luck. This guide walks through what you are actually buying, how registration and bidding work, and how to judge the risk before you bid — with the state rules and statute citations that back each step.
What is a tax lien?
When property taxes go unpaid, the county can sell the debt. In a tax lien state the investor buys a lien on the property, not the property itself. The owner keeps title and a redemption period; if they pay the lien off within that window, the county pays you the amount owed plus interest or a penalty, and your investment ends. If they do not redeem, you may be able to foreclose and take title.
The exact mechanics are set by state and often by county, which is why every state guide in this site names the statute each rule comes from and labels any value a source has not verified.
Lien vs deed vs redeemable deed
Not every state sells the same thing. A tax lien is a claim on the property that the owner can redeem; a tax deed transfers the property itself and is usually final; a redeemable deed does both — the buyer gets a deed but the former owner keeps a window to reclaim title. Some states run a mixed system where the county chooses.
Step 1: Pick a state and county
Start with the state rules — sale type, redemption length, interest or penalty, and how the winner is chosen — then narrow to a county, because registration, deposits and the sale platform are frequently local. The state guides and the all-jurisdictions table are the fastest way to compare.
Step 2: Register and pay the deposit
Registration deadlines and deposits are set by statute or by the collector, and they range from nothing at all to a certified deposit. Some states require a signed affidavit that you owe no delinquent taxes; some require business registration or an eligibility statement before you can bid. Each state guide lists the registration requirement, deposit and forms the registry has verified, and marks the rest unknown.
Step 3: Research the list (due diligence)
The sale list is published ahead of the auction. Confirm the parcel, the amount owed, prior liens, the assessed value and the property condition before you bid. A lien is only as good as the property behind it: if the value is thin or the title is tangled, a high rate will not save the deal.
Step 4: Bidding methods (bid-down, premium, random)
How you win depends on the state. The registry records these bid methods, with the states that use each:
- Bid down interest: Alabama, Arizona, Florida, Illinois, Louisiana, Minnesota, New Jersey, Ohio, South Dakota.
- Premium: Colorado.
- Highest bid: Arkansas, California, Connecticut, Delaware, District of Columbia, Georgia, Hawaii, Idaho, Indiana, Kansas, Maryland, Mississippi, Missouri, New Mexico, North Carolina, North Dakota, Oklahoma, Oregon, South Carolina, Tennessee, Texas, Vermont, Virginia, Washington, West Virginia.
- Minimum bid: Michigan, Montana, Nevada, Pennsylvania, Rhode Island, Utah, Wyoming.
- Rotational: Nebraska.
A bid-down means you compete on the interest rate; a premium bid means you pay above the amount owed; random or rotational methods pick winners without a straight highest bid.
Step 5: After you win: certificate, redemption, foreclosure
- 1.Pay the amount due and receive a certificate or deed, depending on the state.
- 2.The owner gets a redemption window and can pay you back with interest or a penalty.
- 3.If they do not redeem, you may foreclose or complete the deed process — which is where the timeline and cost risk live.
Risks and costs for first-time buyers
- Capital is tied up for the whole redemption period, which can run for years.
- Your return depends on the owner redeeming; if they do not, you inherit the work of foreclosure and ownership.
- Fees, subsequent taxes you may be required to advance, and legal costs are real and are set locally.
- Rules change and vary by county — always confirm the current statute and the county's terms.
State-by-state quick table
All 51 jurisdictions, with sale type, interest or penalty and redemption. Links open the full, citation-backed state guide.
| State | Sale type | Interest / penalty | Redemption |
|---|---|---|---|
| Alabama | Hybrid | the rate is bid down from a maximum of 12% per year | 36 months from the sale |
| Alaska | Tax deed | 15% flat per year | 12 months |
| Arizona | Tax lien | the rate is bid down from a maximum of 16% per year | 36 months from the sale |
| Arkansas | Tax deed | 10% flat per year | no redemption period |
| California | Tax deed | a penalty bid up to 1.5% per month | no redemption period |
| Colorado | Tax lien | 9% flat per year | 36 months from the sale |
| Connecticut | Redeemable deed | 18% flat per year | 6 months from the sale |
| Delaware | Redeemable deed | 20% flat per year | 12 months from the sale |
| District of Columbia | Tax lien | 1.5% flat per month | 6 months |
| Florida | Hybrid | the rate is bid down from a maximum of 18% per year | 24 months |
| Georgia | Redeemable deed | 20% first year; 10% each year thereafter | 12 months from the sale |
| Hawaii | Redeemable deed | 12% flat per year | 12 months from the sale |
| Idaho | Tax deed | 1% flat per month | 14 months from deed issuance |
| Illinois | Tax lien | a penalty bid up to 9% per penalty period | 30 months from the sale |
| Indiana | Tax lien | 110% within 6 months; 115% after 6 months | 12 months from the sale |
| Iowa | Tax lien | 2% flat per month | 21 months from the sale |
| Kansas | Tax deed | 15% flat per year | 24 months from the sale |
| Kentucky | Tax lien | 12% flat per year | 12 months |
| Louisiana | Tax lien | the rate is bid down from a maximum of 1% per month | 36 months from recording |
| Maine | Tax lien | a flat rate (amount not documented) | 18 months from recording |
| Maryland | Tax lien | 10% flat per year | 24 months |
| Massachusetts | Tax title | 8% flat per year | 12 months |
| Michigan | Tax deed | 0.5% flat per month | not documented |
| Minnesota | Redeemable deed | the rate is bid down from a maximum of 12% per year | 36 months from the sale |
| Mississippi | Tax lien | 1.5% flat per month | 24 months from the sale |
| Missouri | Tax lien | 10% flat per year | 12 months |
| Montana | Hybrid | 10% flat per year | 36 months |
| Nebraska | Tax lien | 14% flat per year | not documented |
| Nevada | Tax deed | 10% flat per year | 24 months |
| New Hampshire | Tax lien | 14% flat per year | 24 months |
| New Jersey | Tax lien | the rate is bid down from a maximum of 18% per year | 24 months from the sale |
| New Mexico | Tax deed | 1% flat per month | no redemption period |
| New York | Tax lien | 12% flat per year | 24 months |
| North Carolina | Tax deed | 8% flat per year | no redemption period |
| North Dakota | Tax deed | 12% flat per year | 24 months |
| Ohio | Tax lien | the rate is bid down from a maximum of 18% per year | not documented |
| Oklahoma | Tax deed | 1.5% flat per month | 36 months |
| Oregon | Tax deed | 1.3333% flat per month | 24 months |
| Pennsylvania | Tax deed | none documented | no redemption period |
| Rhode Island | Redeemable deed | 10% first 6 months; 1% each month thereafter | 12 months from the sale |
| South Carolina | Redeemable deed | 3% months 1-3; 6% months 4-6; 9% months 7-9; 12% months 10-12 | 12 months from the sale |
| South Dakota | Tax lien | the rate is bid down from a maximum of 10% per year | not documented |
| Tennessee | Redeemable deed | 12% flat per year | 12 months |
| Texas | Redeemable deed | 25% first year; 50% second year | 6 months from recording |
| Utah | Tax deed | a penalty bid up to 2.5% per penalty period | no redemption period |
| Vermont | Redeemable deed | 1% flat per month | 12 months from the sale |
| Virginia | Tax deed | 10% flat per year | no redemption period |
| Washington | Tax deed | 12% flat per year | no redemption period |
| West Virginia | Tax lien | 1% flat per month | not documented |
| Wisconsin | Tax title | 1% flat per month | 24 months |
| Wyoming | Tax lien | 15% flat per year | not documented |
FAQ
- How do I buy a tax lien?
- Pick a state and county, register with the collector before the deadline, pay any deposit, then bid at the sale. In a lien state you are bidding the interest rate down (or paying the amount owed), and if you win you receive a lien certificate the owner can redeem by paying you back plus interest or a penalty.
- Can you lose money on tax liens?
- Yes. You can lose money if the property is worth less than what you paid plus costs, if you fail to manage and foreclose the lien correctly, or if the county's process takes years. Never bid without confirming the numbers and the local rules for the specific parcel.
- Is tax lien investing worth it?
- It can return a set interest rate or penalty when the owner redeems, but it is not passive and is not risk-free. Whether it is worth it depends on your state's rate, redemption length, and how carefully you research each parcel.
- How long is the redemption period?
- It varies by state, and the registry lists the base period for each jurisdiction. It ranges from no redemption period at all in some deed states to several years in lien states — for example, Maryland at 24 months and New Jersey at 24 months from the sale.
- Do you get the house if you buy a tax lien?
- Usually not right away, and often never. In a lien state you hold a lien, not the property: if the owner redeems you get paid and never own the house. Only if the redemption period passes and you complete foreclosure can the property come to you.
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