Tax Lien Tax Question
i dont know much about tax liens YET, however i'm really curious, what with april 15th approaching and what not. how do you consider the tax consequences for a tax lien? is it capital gains(short or long) or is it subject to SE tax. and should this post be in the tax forum?
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nirav--(MD)-------------------
I think this is an appropriate forum as you are asking about tax liens and a topic related to them.
When you get a redemption on a tax lien, it is interest earned, thus taxed at your ordinary income tax rate. The entity that handled the tax sale and the lien--often the county treasurer or tax collection--will issue you a 1099Misc income form after the end of the calendar year in which your lien was redeemed.
Since you report it as interest income, there is no self-employment social security tax owed.
Good Investing******Ron Starr*************