Who Benefits from the Supreme Court ‘Home Equity Theft' Ruling?
The U.S. Supreme Court ruled that 'home equity theft' violates the Constitution. What does that mean for homeowners?


A 94-year-old woman who lost her home — and her home equity — due to past-due property taxes scored a huge win at the U.S. Supreme Court.
- In the case, Tyler v. Hennepin County, a unanimous Court ruled that it’s unconstitutional for a state to take your home to cover your property tax bill while pocketing the profit from your surplus home equity.
- Since more than a dozen states allow what some call “home equity theft,” the court’s ruling will impact homeowners across the country.
Writing for the Court, Chief Justice John Roberts pointed to “history and precedent” saying that “while the County had the power to sell Tyler’s home to recover the unpaid property taxes, it could not use the tax debt to confiscate more property than was due.”
Christina Martin of the Pacific Legal Foundation who argued Tyler’s case before the Supreme Court, welcomed the ruling. In a release, Martin said, “The Court’s ruling makes clear that home equity theft is not only unjust but unconstitutional.”

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Related: Supreme Court: Yes, the IRS Can Secretly Obtain Your Bank Records
Property taxes and “home equity theft”
This legal challenge began with property taxes, a fact of life for millions of U.S. homeowners. If you don’t pay the property tax due on your home, you can ultimately risk losing your property. But property taxes, which are rising in many states and are a significant expense for many homeowners, are also important for states and localities. Property tax revenue is often used to support critical state infrastructure and services.
As Kiplinger previously reported, in this case, Geraldine Tyler owed $15,000 in property taxes on her Minnesota condo, which she had lived in for more than ten years before moving into a senior assisted living community. After failing to collect the property tax debt from Tyler, Hennepin County, Minnesota, sold Tyler’s home at auction for $40,000.
But rather than return the remaining $25,000 to Tyler, the county kept the surplus home equity. Tyler sued, arguing that retaining the surplus from the sale of her home violated the Fifth Amendment of the U.S. Constitution and that it was also an unconstitutionally excessive fine. Hennepin County argued that Tyler didn’t have a property interest in her home equity and that it followed state law in retaining the surplus funds from the sale of her condo.
Related: Property Tax Explained: What Homeowners Need to Know
The U.S. Supreme Court agreed with Tyler and unanimously ruled that the County had “effected a classic taking in which the government directly appropriates private property for its own use.”
What is a “taking”? The Fifth Amendment to the Constitution prohibits the government from taking property without just compensation. So, under the law, a “taking” is when the federal government takes private property and converts it for public use. “Just compensation” under the law, is a fair and reasonable amount — with a home for example, just compensation might be the property's fair market value.
What Tyler v. Hennepin means for homeowners
The court noted in its ruling that “most states and the federal government require excess value to be returned to the taxpayer whose property is sold to satisfy an outstanding tax debt.” However, about a dozen states can take and sell your home to cover your property tax bill while pocketing any profit from your surplus home equity.
Note: Home equity is essentially your home's current market value, minus what you owe on the property. The greater your home equity, the more money you potentially have to use now or later through investment, a refinance, or a home sale.
So, this ruling will likely force certain states and localities to change their retention approaches or potentially face litigation and liability. The Pacific Legal Foundation cites data showing that U.S. homeowners “lost more than $860 million in life savings on more than 8,950 homes.”
Which states retain home equity?
States that currently retain the surplus equity in your home are Arizona, Oregon, Colorado, South Dakota, Minnesota, Nebraska, Illinois, Alabama, New York, New Jersey, Maine, and Massachusetts. The practice is also allowed in the District of Columbia.
According to Pacific Legal Foundation, states that allow “home equity theft” in certain situations include Montana, Idaho, Nevada, California, Alaska, Texas, Wisconsin, Ohio, and Rhode Island.
Note: While Tyler prevailed at the Supreme Court, the case also serves as a reminder to pay your property taxes on time if you can. Not paying property taxes can lead to a tax lien on your home or in some cases, home foreclosure.
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
Stock Market Today: Dow Nears Record High After Verizon Earnings
The Nasdaq also notched a new high on Monday, while the Dow finished with a marginal loss.
-
I Live Next to a Costco Business Center. Here Are 5 Things You Won't Find at a Costco Wholesale
You don't need to own a business to shop at a Costco Business Center. Here are five reasons to visit the one near you.
-
Why Your Summer Budget Feels Tighter: Tariffs Push Up Inflation
Tariffs Your summer holiday just got more expensive, and tariffs are partially to blame, economists say.
-
Alabama Tax-Free Weekend 2025
Tax Holiday Here’s everything you need to know about the 2025 back-to-school Alabama sales tax holiday.
-
Parents Prepare: Trump's Megabill Brings Three Crucial Tax Changes
Tax Changes Are you a parent? The so-called ‘One Big Beautiful Bill’ (OBBB) impacts several key tax incentives that can affect your family this year and beyond.
-
‘I Play Pickleball in Retirement.’ Is It HSA-Eligible?
Retirement Tax Staying active after you retire may be easier with these HSA expenses. But there’s a big catch.
-
Mississippi Tax-Free Weekend 2025
Tax Holiday Just in time for Prime Day, Mississippi celebrated a tax holiday in July. Find out what back-to-school essentials were included.
-
Ten Cheapest Places to Live in Virginia
Property Taxes The Commonwealth of Virginia has some cheap places to live. Here are a few if you hate paying property taxes.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'
Tax Deductions The GOP tax bill could make hidden homeowner costs worse for you. Here’s how.
-
Retire in the Bahamas With These Three Tax Benefits
Retirement Taxes Retirement in the Bahamas may be worth considering for high-net-worth individuals who hate paying taxes on income and capital gains.