A Certificate of Discharge under IRC §6325(b) removes the federal tax lien from one specific property — nothing else. The lien stays attached to everything else you own, and the tax debt is not reduced by a cent except by whatever the sale actually pays the IRS. What discharge buys you is a transferable title: the buyer (and the buyer’s title company) gets the property free of the lien, so a sale that the lien would otherwise kill can close. This page owns the certificate: the five statutory grounds as a decision table, a worked short-sale example, and the application package. The end-to-end sale sequence — listing, title search, closing-table money flow — is on selling a house with a tax lien; refinancing instead of selling is subordination.
General information, not tax advice. Discharge applications are fact-heavy and transaction deadlines are unforgiving — start early and consider a tax professional for the application package.
| Ground | The test | Fits when |
|---|---|---|
| (b)(1) — Double value | Your remaining liened property is worth at least twice the tax liability plus senior encumbrances against it | You own other substantial property the lien still covers |
| (b)(2)(A) — Pay the IRS’s interest | The IRS receives payment at least equal to the value of its interest in the property being sold | The sale generates equity above senior liens (see the example) |
| (b)(2)(B) — Valueless interest | The government’s interest in the property is worth nothing (senior debt eats all the value) | A true short sale where the IRS would get $0 anyway |
| (b)(3) — Escrow | Sale proceeds are held in an approved escrow account, with the government’s claims against the fund substituted for its claims against the property | The value of the IRS’s interest is disputed or undecided at closing time |
| (b)(4) — Deposit or bond | You deposit cash, or post a bond, equal to the government’s interest in the property | You need the property free now and can collateralize the dispute |
The escrow ground, (b)(3), is the short-sale workhorse: the sale closes, the money sits in escrow subject to the lien, and the fight over how much of it is the IRS’s happens afterward instead of at the closing table.
You owe the IRS $120,000. Your house sells for $380,000; the senior mortgage payoff is $360,000.
If instead the house sold for $500,000 (equity of $140,000), the IRS’s interest would be the full $120,000 — and a payoff that large usually means you should simply pay the liability in full and take a lien release instead. Discharge earns its keep precisely when the property’s equity is worth less than the debt.
Apply on Form 14135, Application for Certificate of Discharge From Federal Tax Lien (Rev. 11-2024), which asks for the proposed sales price and the expected proceeds to the United States and has you check the §6325(b) basis. Publication 783 expects a package, not just the form:
Timing is the hard rule: submit at least 45 days before the transaction date. Send the package to IRS Advisory Consolidated Receipts, Florence, KY (Publication 783 gives 7940 Kentucky Drive, Stop 2850F, Florence, KY 41042), or submit through your IRS.gov online account under the current Publication 4235 routes.
One sequencing trap under (b)(2)(A) and (b)(2)(B): the certificate issues after the payment is made and the IRS receives proof of divestiture and the final settlement statement — so coordinate with the title company up front on how the closing is documented, because the paperwork order matters and a discharge discovered at the closing table instead of at listing is usually a dead deal. The sale-side sequence is laid out on the selling-a-house playbook.
Does a discharge forgive my tax debt? No — in the words of one practitioner guide, “the tax debt does not go away and the lien stays attached to everything else you own.” A discharge releases one property from the lien so it can transfer; the liability, and the lien on your other property and rights to property, continue.
How far in advance should I apply for a certificate of discharge? At least 45 days before the transaction date — Publication 783’s instruction. Work backward from your closing date, and add the time to assemble the appraisal and title report; an application filed inside the window is the most common self-inflicted failure.
What is the IRS’s “interest” in my property? The value the lien can actually reach: the property’s fair market value minus senior encumbrances (debts that outrank the IRS), capped at the amount of the tax liability. It is the “Expected proceeds to be paid to the United States” figure Form 14135 asks for — in the worked example above, $20,000 of equity means a $20,000 interest, even against a $120,000 debt.
Can I get a discharge if my house is worth less than the lien? Yes — that is what (b)(2)(B) (the government’s interest is valueless, because senior debt absorbs all value) and (b)(3) (proceeds held in an approved escrow subject to the government’s claims) exist for. A short sale is not a barrier; it is the standard discharge fact pattern.
General information, not tax advice. Sources: IRC §6325(b); IRS Publication 783 (Instructions for Application for Certificate of Discharge From Federal Tax Lien); Form 14135 (Rev. 11-2024); IRS Publication 4235 (Rev. 7-2025) for submission routes. Currency verified 2026-10-23.