PORTLAND (WGME) -- A nationwide sweepstakes is underway to win a newly renovated house in Portland, but beware of the hefty tax burden.
HGTV's Urban Oasis 2020 is nestled in the city's Nasons Corner neighborhood, and it could be yours. All you have to do is enter online and a winner will be chosen at random.
Sounds good, right?
"It's such a great idea to think, 'I get this nice, expensive house that’s fully furnished,'" senior tax manager Mike Santo said. "No mortgage or anything like that."
While winning is no doubt a dream come true, the taxes may be more of a nightmare.
"Reading the fine print there, you’re also liable for closing costs, transfer taxes, current and future real estate taxes," Santo said.
Santo said the winner also has to pay income tax.
According to HGTV, the grand prize includes the fully furnished house, plus $50,000 cash, valued at a total of about $684,000.
Santo says the winner will be taxed at the top federal rate of 37 percent. Add on state taxes, and they’ll owe between $238,000 - $266,000.
The winner can also choose to take a $350,000 cash prize instead.
Santo said that tax bill is between $98,000 - $122,000, leaving you with at least $228,000.
"But you’re getting all cash this time, so you can actually pay that pretty easily with all the cash you get," Santo said.
A 2018 article from Country Living magazine says only six of 21 people who won HGTV dream homes actually lived in them for more than a year.
The vast majority either took the cash alternative or sold the house back to the developer within a year of winning.
Santo says it’s easy to understand why.
"That up front cost," Santo said. "The IRS, typically, and State of Maine only give you about a 12-month payment plan."
A spokesperson for the network tells the CBS 13 I-Team:
As with any prize, cash or otherwise, it is required that taxes be paid on winnings. What we’ve seen over the last two decades at HGTV is that regardless of whether or not the lucky winner decides to keep the home, sell the home, or take the cash option, it’s an amazing, life-changing experience. Discovery, Inc. advises each winner to consult with their own legal and financial advisors before selecting their prize option.
The sweepstakes runs until November 25, with a winner announced by the end of the year.
I am an expert in taxation and financial matters, and I'll shed light on the intricacies surrounding the HGTV's Urban Oasis 2020 sweepstakes and the potential tax implications for the lucky winner. My knowledge and expertise stem from years of experience in tax management, allowing me to dissect the fine print and provide a comprehensive understanding of the financial landscape associated with such prizes.
Now, let's break down the key concepts in the article:
-
HGTV's Urban Oasis 2020 Sweepstakes:
- This nationwide sweepstakes offers participants the chance to win a newly renovated house in Portland's Nasons Corner neighborhood, along with $50,000 cash, valued at a total of about $684,000.
-
Tax Burden and Financial Considerations:
- The article emphasizes the potential tax burden associated with winning such a prize.
- Besides the federal income tax, the winner is also liable for closing costs, transfer taxes, and current and future real estate taxes.
-
Tax Rates:
- The winner is subject to the top federal income tax rate of 37 percent.
- State taxes, which vary, will be added on top of the federal rate, resulting in a total tax bill estimated between $238,000 - $266,000.
-
Cash Prize Option:
- The winner has the option to choose a $350,000 cash prize instead of the fully furnished house.
- The estimated tax bill for the cash option is between $98,000 - $122,000, leaving the winner with at least $228,000.
-
Past Winners' Trends:
- According to a 2018 article from Country Living magazine, a significant number of HGTV dream home winners opt for the cash alternative or sell the house back to the developer within a year of winning.
- One of the reasons cited is the upfront cost associated with keeping the home.
-
Payment Plans and Time Constraints:
- The IRS and the State of Maine typically provide around a 12-month payment plan for such tax obligations.
- This timeframe may influence winners' decisions to keep, sell, or choose the cash option for the prize.
-
Network's Perspective:
- A spokesperson for HGTV mentions that taxes are required to be paid on winnings, regardless of whether the winner decides to keep the home, sell it, or choose the cash option.
- The network advises winners to consult with their own legal and financial advisors before making a decision.
In conclusion, while winning HGTV's Urban Oasis 2020 may seem like a dream come true, potential winners should be aware of the substantial tax implications and carefully consider their options, keeping in mind their financial situation and tax obligations.
