Last Updated on September 9, 2025
Table of contents
- Tax Deed Overages: A Simple Guide for New Investors
- What Are Tax Deed Overages?
- Why Do These Extra Funds Matter to Investors?
- How Does the Tax Deed Overage Process Work?
- How Can Investors Make Money?
- Which States Have Tax Deed Overages?
- How Property Owners Can Claim Tax Deed Overages
- Legal Rules and Risks of Tax Deed Overages
- Frequently Asked Questions
- Conclusion
Tax Deed Overages: A Simple Guide for New Investors
Tax deed overages are extra money left over after a tax deed auction. In a tax deed sale, the county sells a property to pay the owner’s overdue taxes. The first bid covers the taxes, fees and interest owed. When bidders push the final price higher, the amount above the starting price is the overage.
For example, if the opening bid is $5,000 and you win with $25,000, the $20,000 difference is the extra money owed back to the former owner. In most states, that extra cash does not belong to the buyer. The county keeps it for a short time, while the former owner or lenders can ask for it.
This easy guide explains what tax deed overages are, why they matter and how both investors and property owners can benefit from them.
What Are Tax Deed Overages?
At a tax deed auction, the county collects only what it is owed. Any money paid above the starting bid becomes the tax deed overage. Many new investors think the extra money is theirs, but that is not true. The county puts the money in a special account for a set time (often about a year) and lets the former owner or other lien holders claim it. If nobody files a claim before the deadline, the county may keep the funds for public use.
Tax deed overages are different from tax liens or tax deeds. In a tax lien sale, you buy the debt and earn interest on it. In a tax deed sal,e you buy the property itself. Overages only happen when the auction price is higher than what is owed. Some states use a premium bid method (bidders raise the price), while others “bid down” the interest rate or the share of property they will accept. Bid‑down states, such as Colorado or Illinois, do not create overages because the price does not go above the taxes. Always check your state’s laws before planning an overage strategy.
Why Do These Extra Funds Matter to Investors?
Even though investors cannot keep the tax deed overage, there are two main ways to benefit:
- Earn interest on the whole bid. In some states, like Texas and Georgia, investors earn interest on the full amount they pay, not just on the taxes owed. The interest helps cover the extra money you bid.
- Help owners claim their money. Investors can find the former owner and offer help with the claim process for a fee. You are not buying the overage; you are offering a service. This is allowed in some places but banned in others, so always check local rules. If allowed, you might prepare papers, file the claim and guide the owner.
This type of investing is attractive because it does not require a lot of money. You do not buy the property, only research and contact the past owner.
But there are risks: owners may refuse to work with you, may claim the funds themselves, or the state may not allow third‑party help. Some owners are also wary because of scams. Always remember that tax deed overages are subject to local law and must be handled carefully.
How Does the Tax Deed Overage Process Work?
The tax deed overage process has several simple steps:
- Auction.
People bid on the tax‑delinquent property. Any amount over the starting bid becomes the overage.
- The county holds the money.
The county puts the extra funds in a special account. In some places, like California, overages are defined as anything more than about $150 after costs.
- Notice to interested parties.
Within a set time (for example, 90 days in California), the county must tell the former owner and lien holders that there is money to claim.
- Claim period.
The owner or lenders have a limited time, usually up to one year, to file a claim. They must provide proof of their interest and fill out the county’s forms. If nobody claims the money before the deadline, the county may keep it.
Knowing these steps helps you avoid mistakes. In a 2023 Supreme Court case (Tyler v. Hennepin County), the court said that governments cannot keep the extra money without giving the former owner a chance to recover it. Laws change often, so always check your local rules before bidding or helping with a claim.
How Can Investors Make Money?
Below is an easy checklist for new investors:
- Check the law. Find out if your state allows people to recover tax deed overages and if you can legally help someone claim them. Some states, like Colorado, Illinois, Maine and Massachusetts, do not permit overage claims. Others, such as Texas, Georgia and Florida, let investors earn interest on the entire bid.
- Find properties with big overages. Look at county records or reliable databases to see recent sales where the final price was far above the starting bid. Many counties only require you to pay around 20 % of your bid up front; the rest is due later if the property is not redeemed.
- Locate the former owner. Use public records or other tools to find the person who lost the property. Make sure they are eligible to claim the money.
- Offer your help. If allowed, prepare a clear contract outlining your fee and the owner’s rights. Tell the owner they can claim the funds without your help. In some places, like California, the paperwork must show that the owner understands the value of their claim.
- File the claim. Submit the claim with proof of ownership or lien before the deadline. Keep copies of everything.
- Get paid. After the county approves the claim and releases the money, collect your fee.
Which States Have Tax Deed Overages?
| State | Overages Allowed? | Notes |
| Texas | Yes | Investors earn interest on the whole bid and can recover tax deed overages. |
| Georgia | Yes | Extra money earns interest; recovery services are allowed in many counties. |
| Florida | Yes | Surplus funds go to the former owner; investors can help owners claim them. |
Note: This table shows only a few examples. Laws can change and may differ by county. Always check current rules before you invest.
How Property Owners Can Claim Tax Deed Overages
If your property was sold and you think the county owes you money, here is what to do:
- Check the sale results. Call the county treasurer or tax collector to see if an overage exists for your property.
- Read the instructions. Many counties post claim forms and instructions online. Gather documents like proof of ownership, your ID and any lien releases.
- File your claim quickly. In many places, you must file within one year of the date the county records the deed. If you miss the deadline, you lose the funds.
- Answer county requests. The county may ask for more information. Respond quickly to avoid delays.
- Understand fees. Counties may subtract fees for sending notices and processing your claim.
Be careful of scams. Only sign agreements when you understand them. In California, any assignment of rights to the overage must be in writing and fully explain the value of the claim.
Legal Rules and Risks of Tax Deed Overages
- Different rules by state. Overage rules are different in every state and can even vary by county. Not following local rules can lead to legal trouble.
- Strict deadlines. Claims usually must be filed within one year of recording the deed. After that, the county keeps the money.
- Owner rights. A Supreme Court case ruled that governments must give former owners a chance to recover the extra money.
- Beware of scams. Some people pretend to help but only want fees. Always be clear and follow the law.
Frequently Asked Questions
It is the extra money left over after a tax‑delinquent property sells for more than the amount owed. The overage belongs to the former owner or lien holders, not the buyer.
The county holds the funds in a special account for a set time. If the former owner or lien holders file a valid claim before the deadline, they receive the money. If no one claims it, the county may keep it.
In many places, you have up to one year after the county records the deed to file a claim. Always check your local rules because deadlines vary by state and county.
No. Some states use a bid‑down method and do not create overages. Others allow overages but have strict rules about claiming them. Always research your state’s laws before investing.
Contact the county treasurer or tax collector. You can also check county websites for lists of properties with surplus funds and instructions for filing a claim.
Conclusion
Tax deed overages are not a secret windfall but a regulated part of the tax sale system. When bids go higher than what is owed, the extra money belongs to the former owner or lien holders, not the buyer. Investors can still earn interest on their whole bid or offer recovery services where allowed. Property owners should act quickly and follow county rules to claim their money. Whether you are an investor or a past owner, success with tax deed overages comes from knowing the rules, doing your homework, and always acting within the law.
