Can the IRS Take Your Car? Understanding Asset Seizures and How to Protect Yourself

When most people think about tax debt, they imagine penalties, interest, and possibly a lien on their assets. But what about actual asset seizure? Specifically, can the IRS take your car? The short answer is yes—but before you start panicking, it’s important to understand that car seizures are extremely rare and only happen under specific circumstances.

In this post, we’ll break down when and why the IRS might seize a vehicle, the factors that influence this decision, and most importantly, what you can do to prevent it from happening.

Key Takeaways

• The IRS Can Seize Cars, But It’s Rare – car seizures are uncommon and usually a last resort after multiple collection attempts.
• Equity and Ownership Matter – The IRS is more likely to seize a vehicle with significant equity, such as a paid-off luxury car, rather than a financed car with little value after liens are considered.
• Primary Vehicles Are Usually Safe – If a car is essential for work or daily life, the IRS typically avoids seizing it, especially if taking it would cause economic hardship.
• Taxpayers Have Rights and Options – Individuals facing tax debt can prevent car seizures by responding to IRS notices, requesting a Collection Due Process (CDP) hearing, negotiating a payment plan, or demonstrating financial hardship.
• Proactive Action is Key – Ignoring IRS notices increases the risk of severe consequences, but seeking professional assistance and exploring tax resolution options can protect assets and resolve tax issues effectively.

The Basics of IRS Asset Seizures

What Is an IRS Tax Levy?

A tax levy is the legal seizure of property to satisfy unpaid tax debt. Unlike a tax lien, which is a claim against your assets, a levy actually takes and sells property to cover the amount owed. 

The IRS has broad authority to levy personal property, including bank accounts, wages, and—yes—even vehicles or homes, but this power is only exercised in extreme cases.

The process of a levy can be intimidating, but the IRS does not take action without warning. Before a levy is issued, taxpayers receive multiple notices and opportunities to resolve their debt through payment plans, settlements, or other arrangements.

How Often Does the IRS Seize Cars?

While the IRS does have the legal authority to seize vehicles, this action is incredibly rare. Typically, the agency reserves car seizures for cases where a taxpayer has a substantial unpaid balance, has ignored multiple attempts to resolve the debt, and owns a vehicle that holds significant equity.

According to IRS data, the agency issues hundreds of thousands of levies annually, but only a small percentage involve physical asset seizures. Cars, in particular, are less frequently targeted because they depreciate quickly and may not generate much revenue after towing, storage, and auction costs.

Can the IRS Take Your Car?

Yes, the IRS can take your car, but only under certain conditions. Before initiating a vehicle seizure, the agency will evaluate several factors, including:

• Equity in the Car: If your car is worth more than what you owe on it (if anything), the IRS may consider seizing it to satisfy tax debt.
• Primary vs. Secondary Vehicle: The IRS is less likely to seize a car that is essential for commuting to work or conducting daily activities.
• Cost-Effectiveness of Seizure: If the cost of seizing, storing, and selling the car exceeds its value, the IRS may not pursue this option.
• Financial Hardship: The IRS must consider whether the seizure would create an undue burden on the taxpayer, making it difficult to earn income or meet basic needs.

When the IRS Might Seize Your Car

Before the IRS can seize a vehicle, they must follow a series of steps:

1. Notice of Demand for Payment: The IRS will first send a bill notifying you of unpaid taxes. This is the earliest warning sign that action is needed to avoid further collection efforts.
2. Final Notice of Intent to Levy: If the debt remains unpaid, you’ll receive a final notice at least 30 days before any asset seizure. This letter is a critical moment to act, as ignoring it could lead to the loss of your property.
3. Collection Due Process (CDP) Hearing: Once you receive the final notice, you have the right to appeal the decision and negotiate a resolution. A CDP hearing provides an opportunity to challenge the levy, set up a payment plan, or request a hardship exemption.
4. Asset Seizure: If no resolution is reached, the IRS may move forward with seizing assets, though this is rare for primary vehicles. Typically, the agency prioritizes other collection methods before resorting to physical asset seizures.

If your car is going to be sold, the IRS will give you notice of the seizure. The IRS will then calculate the bid price minimum so that you can challenge the fair market value if you think they got it wrong. The sale will be announced, usually in your local paper, and will typically take place within ten days of the public notice. The money collected from the sale will go towards the cost of selling, paying off your tax debt, and any money that is left over will be refunded to you.

Factors the IRS Considers

Before seizing a vehicle the IRS considers the following. 

• Primary vs. Secondary Vehicles: A luxury or secondary car is more likely to be seized than a primary vehicle used for daily transportation.
• Equity in the Car: If you have substantial equity in the vehicle, it becomes a more attractive target for seizure.
• Economic Hardship: If taking your car would prevent you from working or cause undue hardship, the IRS may reconsider.

Examples of IRS Car Seizures

Example 1: Paid-Off Luxury Vehicle If a taxpayer owns a high-value car outright and owes significant back taxes, the IRS may seize and sell the car to cover the debt. For example, if you own a fully paid-off sports car worth $60,000 and owe $50,000 in unpaid taxes, the IRS might seize the vehicle, auction it, and use the proceeds to settle your debt.

Example 2: Financed Secondary Vehicle If a vehicle is financed and has little equity, it’s unlikely to be seized, as the IRS would need to pay off the lien before recovering any funds. If your car is worth $20,000 but has a remaining loan balance of $18,000, the IRS would only stand to gain $2,000 after a lengthy process—not worth the effort.

Example 3: Essential Use Vehicle A primary vehicle used for commuting to work is generally not seized due to hardship considerations. If you rely on your car to get to work and losing it would prevent you from earning an income, the IRS is less likely to take action.

Hardship and IRS Financial Standards

If you apply for an offer in compromise (tax settlement) or currently non-collectible status (temporary pause in collection actions), the IRS will look closely at your finances, but they understand that some expenses - including vehicle expenses - are essential. When you fill out the applications for these programs, you list all of your income and expenses. 

Then, the IRS analyzes the numbers to see how much you can afford to pay. If they see that you have a very valuable car with a lot of equity, they may instruct you to sell it before approving you for tax relief. However, if you have a reasonably priced car and only one car per adult family member, the IRS will generally consider the car loan payment and operating expenses to be essential.

In fact, the IRS has financial standards that outline how much the agency thinks people should spend in certain categories, and the allowances for monthly car payments are pretty high - as of 2025, it's $619 per month for one car and $1238 per month for two vehicles. The IRS considers operating costs on top of these amounts and those vary depending on your location but tend to range from $200 to $375 per month for one vehicle.

Frequently Asked Questions About IRS Car Seizures

How often does the IRS seize cars? 

Rarely. Seizures occur in extreme cases where other collection efforts have failed.

Can the IRS take your car if it’s financed? 

Generally not, as the lender holds a lien, reducing the vehicle’s equity.

What happens if the car isn’t paid off? 

If the vehicle is heavily financed, the IRS is unlikely to seize it.

How much do you have to owe for the IRS to seize your car? 

There’s no set threshold, but seizures are more common for substantial debts where taxpayers are uncooperative.

Can the IRS repossess a car? 

A repossession is different from a levy. The IRS levies property; repossession is when a lender takes back a financed vehicle for nonpayment.

What You Can Do to Protect Your Car

If you’re facing tax debt, here are proactive steps to avoid asset seizures:

• Respond to IRS Notices Promptly: Ignoring IRS letters only increases the risk of severe actions.
• Request a Collection Due Process (CDP) Hearing: This gives you an opportunity to challenge the levy.
• Negotiate a Payment Plan: Setting up an installment agreement can stop collection actions.
• Explore an Offer in Compromise (OIC): This allows you to settle your debt for less than the full amount owed.
• Demonstrate Economic Hardship: The IRS avoids actions that would leave a taxpayer unable to work or survive.
• Seek Professional Assistance: A tax professional or attorney can negotiate with the IRS on your behalf and provide guidance.

While the IRS has the authority to seize vehicles, this action is rare and typically a last resort. If you’re facing tax issues, the key is to act quickly—respond to IRS notices, explore payment options, and seek professional assistance if needed.

If you’re concerned about IRS collection actions, use TaxCure to find a tax professional in your area. Our curated directory of experienced tax professionals makes it easy to find a pro who can help you navigate your situation, protect your assets, and resolve your tax debt effectively.