It’s the kind of worry that keeps people up at night: You have a hefty tax bill you can’t pay, and the looming dread of the IRS seizing everything you own. Will they take my house? Will they drain my retirement fund?
These fears are not unfounded – the IRS does have some pretty robust collection tools, like the power of a levy, which is a legal seizure of property to satisfy a tax debt.
But here’s the good news: the IRS can’t just walk in and take everything. Federal law has very strict guidelines that the IRS must follow, including a list of specific assets exempt from an IRS tax levy. When the IRS chooses to use a levy, it must abide by those guidelines.
Before you breathe a complete sign of relief, however, while there are assets the IRS cannot seize, the exemptions are narrower than people might assume, and the agency has broad authority to seize most assets for unpaid taxes. What appears safe from a levy on the surface often has significant limitations once you read the details. Keep reading to learn which assets the IRS really cannot touch for back taxes and which subtle pitfalls to avoid that could still land you in hot water. Or to get help now, contact us at Damien’s Law.
Key takeaways
- The absolute basics remain safe: Necessary clothing, school books, limited household items, and some public assistance benefits are generally exempt.
- Exemptions are narrow and capped: A dollar value, updated regularly, offers limited protection for assets like household goods and professional tools.
- Social Security and retirement are only partly safe: The IRS can levy your Social Security benefits. Retirement accounts are often subject to levy, although the IRS has a policy to avoid them unless it determines flagrant abuse.
- The “safe” home is a myth: The IRS can seize your primary residence but must first obtain written approval from a U.S. District Court judge or magistrate, making it a rare but real possibility.
- Proactive resolution is your best defense: The surest way to protect all of your assets, exempt or not, is to resolve the tax debt through an Installment Agreement, Offer in Compromise (OIC), or by qualifying for Currently Not Collectible (CNC) status.
The Federal Rules: Assets Exempt From IRS Seizure
IRC § 6334 lays out the legal basis for which property is exempt from an IRS levy. But it’s a very small concession to basic human needs and dignity. Here are some of the property types that are explicitly or conditionally exempt from an IRS levy.
- Limited clothing and school books
The law protects “such items of wearing apparel and such school books as are necessary for the taxpayer or for members of his family.” Note the word “necessary.” The IRS won’t strip you down to your socks, but an expensive designer rug or $15,000 suit? Those aren’t deemed necessary. - Household goods
Similarly, fuel, provisions, furniture, and personal effects are exempt, but only up to a combined maximum dollar value. The value is capped and adjusted annually and was $11,710 for 2025. If you have a couch, TV, and refrigerator worth $20,000, only the first $11,710 is safe. That’s a pretty tight squeeze. - The tools of your trade
If you rely on specific equipment to earn a living, like a contractor’s tools, a photographer’s camera, or a carpenter’s workbox, the IRS protects those books and tools of the trade, business, or profession up to a specific exemption limit.
While a lifeline for small business owners and freelancers, there’s a catch. That exemption won’t cover a fully equipped, high-tech professional office or fleet of construction vehicles. If the fair market value of your business assets exceeds the cap, the excess is fair game. - Certain payments and public assistance
The following payments designed for basic sustenance and aid are exempt from a levy:- Unemployment benefits
- Workers’ compensation payments
- Certain public assistance and welfare payments (if based on a needs or income test)
- Court-ordered child support payments that the taxpayer is required to contribute to
If these sources generate all of your income, your monthly cash flow is usually secure from a levy.
| Asset | Exempt from IRS Levy? | Caveat |
| Clothing, personal effects | ✅ Yes | Limited to “necessary” items |
| Household goods | ✅ Yes | Value cap applies |
| Tools of the trade | ✅ Yes | Protected only up to the exemption limit |
| Social Security | ❌ No | Up to 15% can be levied automatically, potentially more with a manual levy |
| Retirement accounts | ⚠️ Partial | Some pensions protected; 401(k)s/IRAs often at risk |
| Primary residence | ⚠️ Rarely | Seizure requires court approval |
| Public assistance | ✅ Yes | Fully exempt |
The grey areas – assets conditionally protected from levies
Most taxpayers assume their home and retirement accounts are safe from seizure or a levy. In reality, they’re conditionally protected.
Your home
Is your home safe? Not entirely. While the IRC § 6334 states that a taxpayer’s principal residence is generally exempt, the code does include an exception: “A principal residence shall not be exempt from levy if a U.S. District Court judge or magistrate approves the levy in writing.”
Why so harsh? Because this procedure is a deterrent. Seizing a home requires the IRS to go to court and prove that:
- The tax liability is valid.
- The agency has met all administrative requirements.
- The home seizure is proportional to the debt.
If the debt is substantial (such as over $100,000) and the taxpayer is actively avoiding collection, the threat is very real.
Pensions and annuities
Some specific federal pensions (like those under the Railroad Retirement Act) are exempt. But for most private or employer-sponsored retirement plans like 401(k)s and IRAs, the situation gets murky. The IRS can levy them, but it generally takes such action only after significant deliberation, such as when a taxpayer displays “flagrant conduct.”
This term, while not officially in the tax code, refers to willful, blatant, and seriously improper behavior by a taxpayer intending to evade or defeat a tax liability. The IRS makes this determination when it decides whether to levy a taxpayer’s retirement account.
IRC § 6334(c), a section of the Internal Revenue Code, explicitly states that no property is exempt from a federal tax levy other than the specific property listed in subsection (a). Because 401(k)s and traditional IRAs aren’t on that exemption list, the legal authority to levy them exists.
The IRS treats retirement income payments, such as deferred compensation, as salary or wages. Because they’re subject to a continuous levy, the IRS can garnish these payments once they begin.
Social Security
Despite what many people assume, Social Security benefits aren’t exempt from a federal tax levy. IRC § 6334(c) specifically states that no other federal law, “including Section 207 of the Social Security Act,” can make property exempt from an IRS levy. The IRC overrides Section 207 and allows the agency to levy Social Security payments to pay for back taxes.
However, while the IRS can levy Social Security payments, its power isn’t unlimited. Under the Federal Payment Levy Program (FPLP), the agency can seize up to 15% maximum of a taxpayer’s monthly Social Security benefit. And some payments are protected from an IRS levy, including Supplemental Security Income (SSI), children’s survivor benefits, and the one-time death benefit.
The big misconceptions about IRS tax levies
Most people assume a few assets are untouchable. They’re usually wrong.
Myth 1: My income is untouchable because I don’t earn much and have lots of expenses.
Nope. The wage exemption isn’t a blanket protection. While a certain minimum amount of your income is exempt based on the standard deduction and number of dependents (calculated by the IRS and shared with your employer), the wage levy is continuous. The law requires that your employer must send a percentage of every paycheck, after the minimum exemption amount, to the IRS until you’ve paid off the debt or the IRS releases the levy.
For example: John earns $1,200 gross each week. He files as single, with no dependents. As of 2025, the IRS calculates his weekly exempt amount at $288.46. So each week, John receives $288.46, and the IRS levies the remaining $919. IRS Publication 1494 explains how much of your wages are exempt based on your filing status and dependents.
Myth 2: My state’s law protects me.
This common belief remains, especially in states with generous homestead exemptions. However, when it comes to collecting federal taxes, federal law always takes precedence. If your state’s law says your home is worth $200,000 but it’s entirely protected from creditors, the IRS can still try to levy it because federal law doesn’t care about the state’s exemption. The agency only recognizes the narrow exemptions under IRC § 6334.
Myth 3: Putting property in my spouse’s name protects my assets.
The IRS is very skilled at tracking assets. If you transfer property to a spouse (or other family member) to avoid a levy, the IRS can use “alter ego” or “nominee” liens to argue that the property still belongs to you (or that the transfer was fraudulent) and seize it anyway.
If you have a joint account with a spouse or partner, the IRS can generally levy the portion of the joint account that belongs to the taxpayer. The agency will assume the taxpayer owns 100% of the account, and it’s up to the co-owner to prove their separate contributions.
The bottom line? Exemptions are narrow. Resolution is protection.
The truth is, the list of assets the IRS can’t touch is small, and dollar limits significantly restrict existing protections. If you owe significant back taxes, relying on federal exemption laws alone is a risky strategy. The IRS can seize bank accounts, wages over the exempt amount, and all other non-exempt assets – in some cases, they may even be able to seize your personal assets for business taxes.
The best defense? Not waiting to see what actions the IRS will take, but taking steps to stop the levy before it happens. A skilled tax attorney can work within the IRS’s rules to negotiate a solution that prevents collection action through one of several resolutions:
- Installment agreement (IA): With this simple payment plan, you agree to pay the debt off over time. Once an IA is established, the IRS suspends collection actions, including levies.
- Offer in Compromise (OIC): If you can prove you’ll never be able to pay the full amount because of your financial situation, an OIC allows you to settle your debt for less than the full amount.
- Currently Not Collectible (CNC) status: If a levy would create economic hardship, the IRS can agree to pause collection until your financial situation improves. A CNC will protect all of your assets—both exempt and non-exempt—by resolving the debt and preventing the seizure process from even starting.
FAQs
Can the IRS take my house?
Yes, but it’s rare. The IRS generally needs written approval from a U.S. District Court judge or magistrate to seize your principal residence. The agency must show that other collection methods won’t be enough to pay off the tax debt.
Is my retirement account safe from an IRS levy?
No. But it’s conditionally safe. While the IRS has the legal authority to levy qualified retirement accounts (IRAs, 401(k)s, etc.), it has a policy against it unless a taxpayer has willingly engaged in “flagrant conduct.” But relying on an internal policy isn’t the same as a legal exemption.
Does state law protect me from IRS levies?
No. Federal tax law trumps state law. While a state’s generous homestead or asset protection laws might protect you from other creditors, these laws won’t apply to an IRS levy for federal tax debt.
How much of my paycheck can the IRS take?
The amount the IRS can levy from your wages isn’t a fixed percentage but rather based on the difference between your gross (total) earnings and an exempt amount tied to your filing status and number of dependents (similar to the standard deduction). After you receive the exempt minimum, the IRS levies the rest for each paycheck until you’ve paid off your debt.
Need to protect your assets from an IRS levy?
If you face the possibility of seizure, you need clear, factual guidance that respects the gravity of your situation. Don’t rely on general information or outdated assumptions.
Licensed tax attorney Joseph Damiens, Esq., helps clients navigate complex IRS collection matters, from stopping levies and property seizures to securing favorable resolutions like an OIC.
Schedule a free consultation today to understand your risk and build a proactive defense strategy. Call 601-873-6510 orvisit Damiens Law today.
