What Are Tax Lien Certificates?


Quick Answer

A tax lien certificate is a claim against a property that has unpaid property taxes. They are sold at auction to investors across the United States. The tax lien certificate allows investors to collect unpaid taxes as well as interest applicable to the certificates in the particular municipality or county.

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Full Answer

The interest rate can range from 8 percent to more than 30 percent depending on jurisdiction. The term of a tax lien certificate typically ranges from one to three years. Tax lien certificates can offer rates of return that are better than other investment vehicles but do carry risk of non-payment by the owner for the back taxes, which is rare but can occur in the case of a worthless property.

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