- No one enjoys dealing with taxes, but with knowledge comes power.
- The longer property owners leave taxes unpaid, the more interest and penalties accrue, increasing debt and potentially triggering stricter collection measures.
- Learn about how to purchase a tax lien certificate in Indiana and why you don’t take immediate possession of the property even if you purchase one.
IS INDIANA A TAX LIEN STATE?
Is Indiana a tax lien state, or is it a tax deed state? Each state has different rules and regulations for unpaid property taxes. Let’s see how Indiana handles the process!
If you are just getting started, you’ll quickly learn there is no standardized system for tax liens or tax deeds. Each state has its own tax sale rules and processes.
What I mean by that is the states, combined with the local counties, follow guidelines enacted by the state legislature, which is the governing authority and has the ability to create rules, laws, and procedures that are outlined in narrative form in large manuals referred to as state statutes.
For example, Indiana has different rules than Texas.
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INTEREST RATES
The lawmakers in the state of Indiana have created laws that require property owners who fail to pay property tax to be penalized, and that penalty is a very high–interest rate.
For example, a defaulted property in the first 6 months will have to pay a 10% interest rate on the amount due. That was for the first 6 months, in the second period of 6 months, months 7 through 12, they have to pay 15%.
What I’m telling you in a roundabout way is that Indiana is a tax lien state that will charge outrageous interest rates that are to the benefit of the tax lien buyer.
There are a lot of counties to choose from in Indiana, 92 to be exact, although most of the population is in only 20 of those counties.
PROPERTY TAX
So does Indiana have tax lien sales or tax deed sales?
Today I’m answering your question, “Is Indiana a tax lien state?” The answer is yes! So how do Indiana tax liens work?
Property owners who fail to pay property tax when levied by the county treasurer will be penalized.
Treasurers levy tax, and that’s followed by their attempt to collect property tax.
If the property owner fails to pay property tax, there will be consequences. The treasurer will issue a default notice and also issue a tax lien certificate, which they will ultimately sell at auction.
REDEMPTION PERIOD
Indiana is an understanding and benevolent state. The state legislature allows the county to be lenient with the property owner during the redemption period, and they allow the property owner to stay on the property.
The property owner is not evicted immediately and is allowed to stay on the property during the redemption period.
REDEMPTION PERIOD EXPIRATION
Ultimately, if the property owner fails to pay the property tax plus the accrued interest and the redemption period of one year expires, then at that point, the property owner will be removed.
Indiana has its own rules, as do each of the other 49 states. In terms of tax liens, Indiana is benevolent for a period of one year. At the conclusion of the year, the delinquent property owner will lose, “forfeit,” the property to the buyer of the tax lien certificate.
THE COUNTY TREASURER
For the county treasurer, this tax lien certificate and tax deed process is a business. The treasurer is responsible to bring in the revenue that is needed to pay the many obligations of the county.
For example, the county pays police, firefighters, school teachers, and librarians. I’m only naming a few of the obligations of the county government.
INDIANA TAX SALE – THE TREASURER’S DUTIES
The treasurer is authorized by the state legislature to levy taxes, thereafter, collect taxes, and if uncollected, the state of Indiana issues a tax lien certificate.
Owners of the tax lien certificate will not have immediate possession. However, if the property owner fails to pay after the one–year redemption period, the state will issue many notices of default documents, and the property owner will have forfeited their right of ownership.
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PROPERTY OWNERSHIP
In the United States, everyone is allowed to own property. Once you own that property, you can use it to graze cattle, subdivide it, grow crops, build a barn, or build numerous houses.
However, you’ll also have an obligation, a responsibility, to pay your share of the local county expenses. This share is referred to as property taxes.
This system works for all concerned, and this process benefits all concerned.
The property owner benefits even though the property owner is in default. They are allowed to stay on the property during the redemption or default period. However, Indiana law allows them only one year to recover from sickness, and get a new job, whatever the financial or personal difficulty might be.
TAX DEFAULTED PROPERTY
Other states may not sell tax lien certificates. The legislature in those states requires the county to issue a default notice which initiates the due process of law that allows the treasurer to levy taxes, attempt to collect taxes, and, if uncollectible, seize the property and resell it at auction to the highest bidder.
TAX DEFAULTED PROPERTY AUCTIONS
Most tax-defaulted property auctions will begin at a very low minimum bid. That’s because the county wants the property taxes.
They are attempting to collect the property tax. If they cannot collect, they will sell the property at a public auction, and that revenue will pay the property taxes.
This is a serious business. Newcomers, students, and investors may expect as many as 5,000 tax auctions nationwide this year. Each county will publish its tax sale properties list in the local newspaper and on its website. Tax sale results are published publicly as well.
TAX LIEN CERTIFICATES
Tax lien certificates in Indiana earn outrageous interest rates. 10% during the first 6 months, and 15% in the months from 7 through 12. There is also a provision for overbids which will pay an additional 5%.
There is a lot to like about Indiana from an investor’s standpoint. Tax liens pay substantial interest rates throughout the year.
COMMISSIONER’S SALES
Indiana also conducts commissioners’ sales. I rarely talk about commissioners’ sales because the property, in most instances, has been pretty well picked over, and it’s almost a desperation sale by the county dumping properties.
From my perspective, it’s difficult to make a $25,000 profit on these low-end commissioner’s sale properties, and I’m not willing to risk money on these particular tax-defaulted properties.
“However, some investors desire this type of property which requires expensive rehab and may be in a poor location.”
CONCLUSION
The answer is yes, Indiana sells tax lien certificates.
When you purchase a tax lien certificate in Indiana, you don’t take immediate possession of the property. The certificate has a one-year redemption period, meaning that the owner of the property has one year to pay the back property taxes plus interest.
The interest rate is 10% for months 1 through 6, then 15% for months 7 through 12, and that interest is paid to the holder of the tax lien certificate. If you hold that certificate and you don’t get paid all your money back plus the interest, then you get the property.
Tax lien certificates are an excellent passive investment, and they’re secured by real estate. You either get paid the high rate of interest, or you get the property.
Additionally, the certificates are sold in amounts to suit all budgets, whether you have $100 or $100,000 to spend. There’s something for everyone, including you!
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