How Tax Lien Certificates Work

It’s easy and profitable to invest in tax liens if you know how tax lien certificates work.  Learn more about this lucrative business.

Today I’m answering your question about how tax lien certificates work.  

This is a good place to start. If you get it right and understand the process now, you’ll be able to earn safe, secure money for your family for decades. 

Want to learn how you can make big profits from deep discount real estate? Would you like to buy nice homes for pennies on the dollar? Or earn double-digit interest rates? Then you won’t want to miss this FREE mini class.


Nationwide, local counties will issue millions of tax lien certificates. Are tax lien certificates risky? All investments come with some level of risk. However, savvy investors like this type of investment because it’s so safe and secure and predictable.  

Why is it safe?  The first reason is your money is invested with the local government entity.  That means it’s safe and secure.  The local government entity is considered a trusted source. 

Another valid reason for safety is the investment in the tax lien certificate means the investment is secured by real property.  


how to buy tax lien certificates safe secureHere’s how tax lien certificates work to generate amazing profits. I want you to imagine a small investment where you only invest $2,000 in government certificates, and the interest the government is willing to pay you is 16% on your certificate. 

Let’s assume that you invested today, and we could look into the future one year from today. You would have earned $320 if it was invested at 16%.  

Because you are a new investor, you then decide to reinvest your $2,000 principal and your $320 interest.

You reinvest all of that money in tax certificates because after doing it for one year, you liked it so much that you decided to continue for 19 more years. 


I’m not a CPA, I’m not an attorney, I’m just a prepared investor.  It’s amazing how many have never heard or thought about tax lien certificates. 

In all counties across the United States, property taxes are collected. In half of those counties if the taxpayer defaults, the county will issue a tax lien certificate.  

For example, in Florida all 67 county governments participate. In recent years, those counties have auctioned off as many as 1 million certificates each year.

If this is interesting to you, I have a free mini course. It’s a free gift from me to you that will teach you the secrets of tax lien certificates and how to profit in tax deeds.


expired tax liensWhat is a tax certificate? Let’s talk more about how tax lien certificates work. 

The fundamentals are really basic, and the process of collecting taxes is relatively simple.  Although, it does require cooperation of the state legislature and the local county.

Together, they realize property owners do not like paying taxes.  So, they have created a system that is more than fair.  

For example, the legislature authorizes and mandates that the local county government, usually the treasurer, levies taxes and collects those taxes.

If the taxes are uncollectible, the treasurer is mandated to either issue a tax lien certificate, or in some states, a tax deed. 

This is all legal.  It’s all ethical and if the county doesn’t get paid on a tax certificate, they will seize the asset and sell the asset at a public auction.  The point I’m making is the consequences of nonpayment of tax are severe and final.  


The United States has over 3,000 counties, and approximately half of the counties will sell tax lien certificates. 

When the county sells a tax lien certificate, the owner of the property remains on the property. They are not evicted or pushed out of the property.  That means if you purchase a tax lien certificate, you do not acquire the property immediately.  

Tax auctions with tax lien certificates or tax deeds in almost all cases, will wipe out the mortgage.  The mortgage is deleted from the property records.  


propertyAll properties in the United States are taxable except for churches and schools. Congress makes the rules. 

Everyone is allowed to own property, and with ownership comes responsibility.  The owner may rent the property,  subdivide the property, grow crops or allow timber to grow. The owner has freedom to do as they please. 

However, the owner must pay property tax in the amount determined by the assessor (tax collector).  If the owner does not pay property tax and defaults, the owner has forfeited their rights in the property to the local government. 

The local county already owns other property; they don’t want more. With the approval of the legislature, the county has devised a system to auction first tax lien certificates and ultimately tax deeds

Most individuals don’t realize this is the case. However, the law is clear. Property owners must pay their fair share of the county expenses (property taxes) or the property owner will forfeit ownership rights.  


The local county will issue official notices of past due taxes in default.  At that point, owners will in some cases, abandon and move to different locations.  The official notices of default will continue.

Perhaps the owner has passed away with no heirs to pay tax or is sick or lost their job.  In some cases, it’s the world of the weird. Unfortunately, no tax collection means no revenue for the county.

Now the county has a problem.  Normally, the money is received from property taxes.  The county uses that revenue to pay bills.

For example, they must build schools and hire school teachers. The county is responsible for police and sheriff departments and must pay the fire fighters and donate money to the hospitals. 

In other words, the county needs revenue to pay county employees and many other payments. 


illinois tax lien certificate
Illinois Tax Lien Certificate

The law requires all property owners to pay taxes.  In the tax lien states, they issue a tax lien certificate which they plan to sell in order to get revenue to pay the county bills.  

These certificates are safe and secure. The certificate holder now has rights in the property. When the property owner finally recovers from sickness or unemployment, the certificate holder will receive a huge outrageous interest rate.

For example, in Arizona it is 16%. In Florida 18%, Iowa 24%, and in Illinois 36%.

I certainly haven’t covered all the states.


This is a safe and secure reward for helping the county pay their bills and allowing the property owner to stay in the property and not lose their home while they’re recovering from whatever crisis life has dealt them. 

Property owners in the tax lien states will find that this is a benevolent process which means the county is responsible and lenient to allow the property owner time to recover from whatever unfortunate event might have happened. 

In tax lien states, investors enjoy generous rates of return. However, they rarely end up with the property, as county treasurers report 95%-97% of all tax lien certificates redeem within 24 months. In other words, the property pays the back taxes.


We hope you enjoyed Ted’s lesson on How Tax Lien Certificates Work.

Tax lien certificates are one of the safest investments in America.  You’re investing with the government, and your investment is secured by real estate.

Unlike most other safe investments, tax lien certificates pay a high rate of interest, as much as 36%.  Since the tax lien is secured by real estate, you either get the high rate of interest or you get the property without a mortgage.

95% to 97% of the time, the certificate will be redeemed and you’ll get the interest, making tax lien certificates an excellent passive investment.

Also, you don’t have to be rich to invest in tax liens.  You could purchase one for $50 or $50,000.  They come in all amounts to suit all budgets, and there are millions of them available all across the USA.  Anyone can do this.

If you’d like to know more about how tax lien certificates work and how you can profit from them, there’s no one more qualified to teach you than Ted Thomas, America’s leading authority on tax lien certificates and tax defaulted property investing.

Ted Thomas is the only one who provides full support and complete training with home study courses, Q&A webinars, live tutorials, workshops & web classes, and personal one-on-one coaching.

Ted Thomas classGet started today at no cost with Ted’s FREE Master Class. It’s only about 1 hour of streaming video and will open your eyes to the incredible opportunities available in tax lien certificates and tax deed investing.

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Ted Thomas

Ted Thomas is America’s Leading Authority on Tax Lien Certificates and Tax Deed Auctions, as well as a publisher and author of more than 30 books. His guidebooks on Real Estate have sold in four corners of the world. He has been teaching people just like you for over 30 years how to buy houses in good neighborhoods for pennies on the dollar. He teaches how to create wealth with minimum risk and easy-to-learn methods.

The Ted Thomas Difference:

  • Ted is recognized as America’s Tax Lien Certificate & Tax Deed Authority and has been helping people with investing in tax defaulted properties for over 30 years.
  • Ted has built a team of certified coaches that have 70 combined years of auction experience and are available to his students by phone to guide and mentor you to avoid getting overwhelmed or worse, losing money
  • Ted has ironclad PROOF that what he is teaching you does work. With hundreds of successful students providing testimonials and a 4.9 Google rating which is unheard of in this industry.
  • Ted and his staff don’t hide behind a website; they can be reached during office hours at 321-449-9940.

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