If I were to win the 1.2 million dollar dream house from HGTV, how great would my tax burden be?
Would I be best off selling it? How about taking out a loan for the taxes and leasing the place out?
Do they give the option of just taking the cash value? I thought most contests do that.
If that winning were your only income for the year, the Federal income tax on it would be just under $400,000. The state tax would depend upon what state you live in, of course. I doubt that you could lease it out for enough to cover the costs of the half-million dollar loan you had to take out to pay the taxes.
This is a problem that prize winners often run into - they can’t afford the income taxes on the prize they’ve won, and have to sell it immediately. I believe Revtim is right, however - many contests let you take the cash value.
So far since HGTV has started this Dream House give away.
Every winner has had to sell the house due mainly to the tax issue.
In last year sweepstakes there was support in trying to help whoever won the Dream House that year to donate money to help off set the tax, so that the winner could actually keep the house. I don’t think it got enought support, but the trend seems to be growing. I’m sure that once it catches on that many will contribute to help, but time will tell. Last years entries broke records as it one in the millions. Who knows maybe people will get wind of it and this years winners will actually get to keep the house.
But those who have won the Dream house in past years were actually successful in selling their dream house and then turning around to buy a much more affordable Dream house for themselves.
I for one would like to win this one, but if I don’t I’ll still would contribute to help offset the tax. Maybe one day the winner of the Dream House will actually get to keep it this time. Whoever it is I’ll double my contribution from last year to $20.00.