Equity on primary residence


New member
Hello all,

I am considering an Offer in Compromise for a 195K tax debt and have this question:

The equity on my primary residence is $60K (I get to this number doing 80% of the FMV and subtracting the outstanding mortgage). My monthly disposable income (as calculated by the thresholds that the IRS gives) is $1,500. I do not have any other assets.

The way I understand it, my offer should not be lower than Net Equity + either 12 or 24 months of disposable income (in my case either 78K or 96K). The problem I see is that if I offer this and get my offer accepted, I will not have the cash to pay as I cannot borrow on the 60K home equity (I received a letter of denial from my Bank and my credit is pretty much dead).

Must I include the 60K in my offer or, given that I cannot procure a loan from it (and have evidence to prove this), I should only offer 12 or 24 times my monthly disposable income? (18K or 36K). In other words, I do not want to set up up myself for failure.

Not sure if this has any bearing on the question, but the statute of limitations run out in 5-7 years. Also, given some health issues that I have and that I am close to turning 60, my monthly disposable income is not going to go up (more likely it will come down).

Thank you very much for any guidance you can provide.


Company Director, EA
Staff member

I am not sure what you currently owe the IRS but if the equity in assets is more than the balance, you can try to ETA offer with the IRS, age and medical will play a factor in it. Since your disposable income is 1500, your offer most likely will not be accepted because thats $1500 that you have left to pay toward your balance in monthly payments. I would recommend contacting a tax professional, possibly seeing if partial pay installment agreement or penalty abatement are an option for you. Hope this helps