Can I refinance my home if I have a tax lien?

Refinancing with a tax lien is possible but requires coordination with the IRS. The most common approach is to request lien subordination using IRS Form 14134. Subordination allows the new mortgage lender to take priority over the IRS lien, which is what lenders require to approve the refinance. The IRS may approve subordination if the refinance will ultimately help them get paid (for example, if you'll use cash-out proceeds to pay the tax debt, or if lower monthly payments free up funds for an installment agreement). Processing takes 30-45 days. Another approach: if you owe $25,000 or less and enter a Direct Debit Installment Agreement, you can request lien withdrawal (Form 12277), which removes the lien entirely and clears the way for a standard refinance. Some taxpayers use the refinance itself to pay off the tax debt, essentially converting tax debt to mortgage debt at a much lower interest rate. This requires the lien to be subordinated first, and you need sufficient equity.