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Can You Buy a Home with IRS Debt? Owing money to the IRS is unsettling for anyone. It’s also very easy to find oneself in that position. Many people are shocked to discover that they inadvertently miscalculated the amount of taxes owed either at the end of the year or from a previous year. There are also unexpected events that can cause a tax event such as a windfall profit or inheritance. Regardless of the cause, owing money to the IRS is no fun. If you are considering a home purchase, you may be wondering how this will affect your ability to do so. If you owe back taxes to the IRS, most likely there is a tax lien. A tax lien is a personal lien that is attached to the person and any property they own. A tax lien takes priority over all other financial obligations, including a mortgage. This puts the lender at greater risk since in the event of a default, they would only be paid after the IRS lien was satisfied. The good news is that although owing back taxes can make buying a home more complicated, it does not prevent you from buying a home. First step is to contact your lender and explain the situation. There are many reasons people owe back taxes that do not make them a credit risk. You may be able to either pay off the taxes or arrange a payment plan with the IRS that will allow you to finance a new home. There are options, but being honest with your Lender upfront will help you understand your options.