Tax Liens 101: How One $1,000 Investment Became $30,000 in Equity
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I’m so excited to share a fun, serendipitous story! In this age of online networking, with all the AI DMs and salesy pushing on LinkedIn, I found an amazing woman who happened to comment on one of my posts on Alignable. She sounded like she knew what she was talking about, so I reached out. One Zoom meeting later, I knew I had her bring her onto the Podcast!
If you are frustrated with social media, know that there are real people out there and real collaboration opportunities if you are doing good work. That brings me to Cynthia, a tax strategist who is helping business owners move from earning to owning.
The Difference Between a CPA and a Tax Strategist
Many people say, “I already have a CPA,” but there is a massive difference between a typical accountant and a tax strategist. An accountant deals with the facts; it’s a point of compliance. They report what happened in the previous year based on your W2 or K1.
Right now, we are in the 2025 compliance period. Anything you do today won’t impact your taxes until the 2027 filing. By then, the savings are no longer available. A strategist works with you throughout the year to ensure you use the legal codes available to you, like the Augusta Rule or hiring your children.
If you hire your kids, you can move money from your tax bracket to a zero-tax bracket, up to $16,000 per child. For a business owner with two kids, that’s $32,000 removed from your taxable income. But you have to document the job description and the work during the year. You can’t document it after the fact during the compliance period. We prepare and plan this year so we can comply in the future. As the saying goes: pay every dollar you legally owe, but not one cent more.
Understanding the Tax Code as a Reward System
Stop making the government your business partner. The tax code was written for small business owners, but we often don’t know what we don’t know. If you look at the tax code as a reward system instead of a punishment, everything changes. The government incentivizes certain activities to keep money flowing through the economy.
Real estate is one of the biggest drivers. When you buy a property, ten different people, inspectors, appraisers, agents, get involved and pay taxes. Because you are sparking that economic activity, the government rewards you with deductions and strategies like 1031 exchanges to keep that momentum going.
The “Now What”: Investing in Tax Liens
Beyond saving on taxes, the goal is to create passive income. One powerful way to do this is through Tax Liens. Every piece of property is under the jurisdiction of the state. There is an “invisible lien” on that property that stays invisible as long as you pay your property taxes.
When an owner stops paying, the county notifies them and everyone else with an interest in the property (banks, lenders, etc.). If no one pays the pass-due bill, the debt goes to auction because the county needs that money to run libraries, police departments, and schools.
This creates incredible opportunities. For example, a condo in Santa Clara valued at $1 million once had a starting bid of only $40,000, the amount of the unpaid taxes.
Turning Pennies into Property
You don’t need a massive budget to start. One student, a single mom and pharmacist, started with a budget of $1,000. She bought three liens in Arizona. In Arizona, there is a three-year redemption period where the owner can pay the debt. While you wait, you earn 16% interest.
One of her liens was redeemed, but the other two were not. She ended up with the deeds to two properties worth $15,000 each. She turned less than $1,000 into $30,000 in equity. Another student, a server in Las Vegas, bought raw land for about $2,000 that was worth $25,000 the moment she took title.
Strategy and Due Diligence
Whether you are investing in liens or running a business, you must have an exit strategy. You should formulate three plans at the inception of any investment: the best-case scenario, the worst-case scenario, and the middle ground.
You also need to know your market. Look at economic development. If a county is building a plant that will employ 13,000 people, the demand for land in that area will skyrocket in five to ten years. Look for proximity to hospitals, schools, and airports.
If you are a business owner and you spend at least 750 hours a year evaluating, managing, or looking at properties, you may qualify as a Real Estate Professional, which significantly changes your tax situation.
The journey from earning to owning is built on curiosity and collaboration. Find the experts who fill the gaps you don’t serve, and remember: the tax code is there to reward you if you learn how to read it right.
Connect with Cynthia:
Facebook Group: investlikeaGoddess.com
Linked-In: Linkedin.com/in/taxstrategywithcynthia
Website: https://taxcodegenie.com/
Podcast: https://podcasts.apple.com/us/podcast…