I've done a piece on the HGTV Dream Home the last couple of years since we stopped by the 2009 Dream Home which was in Sonoma, CA, near my daughter's college. We went by that house again a few days ago and it looks like it's finally occupied. Like nearly all of the 14 previous Dream Homes the winner didn't take the house, but elected the cash payout instead.
They just released the info on the 2011 version, a mountain home in Stowe, VT:
Lots of inquiries from people wondering what the taxes will be like on the Dream Home. Well, the total value of the award will be considered regular income, so you can expect to pay federal taxes in the highest possible bracket - something like 39%. On an award of this size the Vermont state tax rate is something like 9.5%. Add to that the property taxes that will be due each year on this very expensive property, and the registration and taxes on the truck, and you've got quite a nut to crack before you can consider living there. That's why there aren't any winners that I know of actually living in the houses they won.Get your calculators out, folks. According to the official rules the total prize package (house, furnishings, vehicle + $500K in cash) is worth $2,051,120. There is, however, a cash option if you choose not to take title on the house. That option is $650,000 cash for the house plus the $500,000 cash prize plus the 2011 GMC Acadia Denali - total value $1,201,120. That'll buy a lot of maple syrup and still pay all the taxes.
If this drawing goes like all but one of the previous 14, the winner will never move in. And the one guy that did take the house couldn't afford to keep it and later had to sell. It's a great marketing idea for HGTV and their sponsors, but probably not a practical house for most people.
I'll take the cash.
UPDATE: The winner has been announced - a family in Hinsdale, IL. I'm not sure why HGTV would release that information before the awards show airs on March 19th, but they did. Frankly, there's no reason to watch now.
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17 comments:
I dont see why it would be smart to take a average american and tax the living day lights out of them during this time. I would rather give them a tax discount based off of what they make. then help them out because in the long run you would make more. Think about it government if you set high taxes people try to avoid them like the plague. If you help them out they pay you throughout the time there living on this earth. plus if you give the house to your son or daughter they would pay tax. everyone wins in the long run!!!
I will take the cash, too! :)
Just curious, since I too am interested in the tax liability, but if I were to win the house, would I pay taxes in VT or my home state? Same goes for if I take the cash instead of the home? Does anyone know or will I have to re-post after I've won so I can give the answer myself? *wink*
That's a good question, Liz. I think if you take the home you'll pay taxes in VT. However, if you take the cash I'm not sure how your home state will treat that. Usually funds earned out of state are only taxable in that state.
Either way, it's a problem I'm willing to have.
Please explain to a simpleton to me, why anyone would take the cash which is 'only' $1.2M and not take the whole prize at $2.1M?
OK you have the headache of selling the home, (and paying more taxes) but even with all the taxes surely you would end up taking more cash home in your own pocket, albeit it would take longer?
With the cash prize, would you not take home about $700,000 ? and the whole prize, $1.2?
Or am I missing something??
Cash option: 35% tax on 1.2 mil is $420,000 leaving the winner with a pocketbook crammed with $780,000. Taxes aren't due until the following year so the opportunity to make money with your money prior to that is a huge boon. Now for the House Option:
35% tax on 2.1 mil is $735,000 due in just over one year. Winner has $500,000 cash to pay Property Taxes for 1 year, ($24,000), Utilities ($12,000), Fees (who knows), travel expenses, time lost from work, children displaced, real estate agent commision etc, and pray like hell the house sells for 1.2 mil in less than a year! And that's just to get the same cash into your pocket as the Cash Option. Roll into the next year with no sale and your expenses just keep adding up.
Take the cash option, a nice winner's vacation in beautiful Stowe, and save yourself the headaches.
I definitely want 700k. I'm glad that HGTV provides this option, because otherwise the winners would have to be rich!
I'm actually more worried about family members I've never heard of popping up to claim some of my winnings. No one that I don't speak to regularily is getting any of my money! No one in my family is wealthy or well-to-do, therefore I'll need to watch out. The worst part is that my face and name will appear on national television. Life would never be the same again! There's also the problem of irresponsible family members asking to borrow money(I want enough to live off of for a few years). I'm not sure if I want the home anymore- I'll just opt to be a poor student again! How do sweepstakes winners cope with being hounded for money from friends, families or charities?
Wouldn't the winner have the option of remaining anonymous? I fear the same thing everyone else does with the family and friends coming out of the woodwork. As for me, if I was fortunate enough to win, I won't even tell my cat. It is a large sum of money but if you break it down with the cost of living, it won't last a lifetime. However, you could put the bulk of it in a CD or something to that effect and probably be able to live comfortably on the interest alone. GOD I HOPE I WIN.
Take the house! Hire a property management company to rent it out, many properties in the area go for $2000 a night! This is a high end vacation area, conservatively you could bring in 100k a year. Take out a mortgage on the house to pay all of your taxes for the first year, then its money in your pocket from there on after you attack the mortgage and pay it off.
I agree on taking the house! Start up a business....put a nice size office in the house with lots of equipment that will depreciate...and use the vehicle as the ole office car! Who knows...Vermont may even give you an incentive for starting a new business there... Just a thought!
I don't know when I ever wanted something so badly. All week I have had the butterflies and am a breath short of having a panic attack. Win or lose, it will be emotional. I want to think positive and tell myself someone is going to win it and I have as much a chance as anyone, but then my negative side tells me not to hold my breath. With no jobs to be found, I am living off of selling my collectibles and am quickly running out of them. Winning for me would make a definite change in my life. For the first time in 14 years, I can stop worrying or at least stop worrying so much. Without question, I would take the $780,000 and put it in a bank as a jumbo CD. It would generate enough interest to live month to month and the CD will be there for me at retirement age. The anticipation of learning who won is killing me.
Just a little advice for those who are talking about throwing the money in a CD. Don't. You'd be lucky to get around 1% interest. That means if you measure in inflation, you're actually losing money, just not quite as fast as a checking account. Put it in good diversified mutual funds and get yourself between 9-12% interest, and dont touch the money! (other than maybe paying off current debt) When you retire in 30 years you will be a multi-millionare!
Well, it looks like another winner and another year it wasn't me. I hate to sound bitter but why is it every time someone wins something like this, it is someone who already owns a home or has money to burn. I have spent 14 years in an apartment and raised 4 children living on dollars a day with no assistance from anyone and the struggle is getting the best of me. Doubt I will ever enter another contest. Just way to hard to see someone who has everything, get the reward folks like me only can dream about.
Hold on, Cheryl, the winner hasn't been chosen yet (or at least announced yet). That doesn't happen until March 19th, 8pm ET.
Hi Rick,
I was under the impression that the winner wasn't to be announced until the 9Th but in the link I am enclosing, the cat is out of the bag. A family in Illinois with 2 children has won dream home 2011.
http://blog.hgtv.com/dreamhome/category/hgtv-dream-home-2011/
I stand corrected. Thanks for the info.
The American dream is dead when you win a house and can't afford to keep it because of taxes. It's amazing how we all accept this as somewhat normal.
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