Income Tax Consequences of Winning the 2012 HGTV Urban Oasis in Miami, Florida

Picture of 2012 HGTV Urban Oasis in Miami, Florida

Note: To see analysis of the most recent HGTV home giveaways, please visit my new website Key Policy Data.

This year’s HGTV 2012 Urban Oasis Giveaway is in Miami, Florida. According to the HGTV contest rules, it comes with a home and furnishings valued at $900,000–interesting, this home does not come with any cash as the recent 2012 HGTV Green Home Giveaway did ($100,000 worth).

Of course, the cash would have come in hand because if you win the dream home, be prepared for a hefty federal and state income tax bill (this analysis excludes the myriad of other taxes such as any deed or transfer taxes and, most especially, the property tax which you pay year, after year, after year . . . well, you get the picture).

Fortunately, thanks to the benefits of tax competition between the 50 states, there is no personal income tax in Florida . . . maybe that’s why they didn’t include any cash in the prize? For instance, the 2012 diy Blog Cabin Coastal Retreat is in high-tax Maine and the state income tax increased the total tax bill by 27 percent.

Nonetheless, the federal income tax bill alone comes to a whopping $274,900. If you plan on keeping the home, best be prepared to take out a home-equity loan to pay Uncle Sam.

Fortunately, HGTV does provide an escape hatch by offering $750,000 in lieu of taking possession of the home. If the winner opts for this choice, they will take home $527,701 free-and-clear after paying income taxes of $222,400.

My suggestion would be take this money and run. One could outright buy a very, very nice home with the cash and have zero debt. You could certainly buy that other home in Florida which is a pretty low-tax state. However, in Florida you would still have to deal with a sales and property tax. On the other hand, there are a handful of America’s tax havens left (all in New Hampshire) where there are no state and local income or sales taxes and very low (in some case no) property taxes.

  • Lzsprinter12

    Wouldn’t you still have to pay state income tax if you don’t live in the state of Florida?

    • lzsprinter12, inter-state tax comparisons can be tricky because states have “tax treaty” agreements with one another to determine what gets taxed where.  For instance, if you live in New Hampshire (no income tax), but work in Massachusetts, you pay Massachusetts income tax.  Or vice-versa.

      In this analysis I have assumed that these winnings would be treated in a similar fashion as wages and salaries.  That could be different from state-to-state.  Any tax accountants out there want to weigh in on this?

      Nonetheless, it’s really the federal income tax burden that really hurts anyway . . . unless you live someplace like California then state income taxes would matter as well.