Subsequent Taxes

Subsequent taxes are the property taxes that accrue on a property after the initial tax lien has been sold to an investor. When a property owner is delinquent on their taxes and a tax lien is sold, future tax bills continue to be generated. If the property owner remains delinquent, these subsequent taxes may also go unpaid, creating additional tax obligations on the same property.

In many jurisdictions, the original tax lien certificate holder has the right — and often the strategic incentive — to pay these subsequent taxes. By paying subsequent taxes, the investor adds to their total investment in the property but also strengthens their position. The subsequent tax amounts typically earn the same interest rate as the original lien and are included in the total amount the property owner must pay to redeem.

Failing to pay subsequent taxes can create complications for the original lien holder. In some states, new tax lien certificates may be issued for the subsequent years and sold to different investors, creating competing interests in the same property. This can complicate foreclosure proceedings and dilute the original investor's position.

Smart investors budget for subsequent tax payments as part of their overall investment strategy. Before purchasing a tax lien, they estimate the potential subsequent tax obligations and factor these into their total expected investment and return calculations. This proactive approach ensures they have sufficient capital to protect their investment throughout the redemption period.