Are Taxes Forcing 2011 HGTV Dream Home Winners to Sell?

Picture of 2011 HGTV Dream Home in Stowe Vermont

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

It was just announced that the winners of the 2011 HGTV Dream Home in Stowe Vermont have put their house up for sale . . . for a cool $3,795,000. However, this clip from the story makes you wonder if property taxes aren’t to blame:

The annual taxes on the home are $27,720, according to town appraiser Tom Vickery.

The town-appraised value of the house is $1,521,000 million; however, that’s based on 2005 selling prices and doesn’t take the furnishings and artwork into account. Vickery is working on a townwide appraisal and expects the home’s value to increase somewhat once the appraisal is completed this summer.

OK, so they are paying $27,720 in property taxes on a $1.5 million valuation. They have the house up for $3.8 million, which means the comps are indicating that the assessed value will “somewhat” increase by at least double! In that case, the property tax bill alone will be a whopping $55,440 per year. And that’s before utilities, maintenance, insurance, etc.

This is why I would advise any winner of these dream homes to take whatever cash you can and run . . . as I mentioned in my previous blog on the 2012 HGTV Dream Home in Midway, Utah.

Income Tax Consequences of Winning HGTV 2012 Dream Home in Midway, Utah

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

Another year and another HGTV Dream Home. This year’s HGTV 2012 Dream Home is a river-front home in Midway, Utah. According to the HGTV contest rules, it comes with a home and furnishings (valued at $1,500,000), cash ($500,000) and a 2012 GMC Terrain SLT2 ($38,755, shown above) for a grand package valued at a cool $2,038,755.

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). Overall, the federal and state income tax bill comes to a whopping $775,586. Even after using the $500,000 in cash, you will still be left with a tax bill of $275,586 . . . maybe the IRS will let you pay on an installment plan?

Fortunately, HGTV does provide an escape hatch by offering $800,000 in lieu of taking possession of the home, plus the $500,000 in cash and vehicle–for a grand total of $1,338,755. If the winner opts for this choice, they will take home $843,169 free-and-clear after paying income taxes of $495,169.

My suggestion would be take this money and run. One could outright buy a very, very nice home with the cash. For example, check out this home in beautiful Hale’s Location, New Hampshire listed for $729,000 and still have enough left over to put into your IRA. Hale’s Location is one of 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. In fact, according to the listing, the property taxes are a mere $1,887 per year.