Sunday, January 18, 2015

Why I Can't Afford To Win The HGTV Dream Home

HGTV is giving away another dream home. This year it is in Martha's Vineyard, Cape Cod, Massachusetts.  According to the website:

"The grand prize includes:

  • A 3-bedroom, 3 ½-bathroom, approximately 3,200 square-foot Cape Cod-style getaway located on Martha's Vineyard
  • Luxurious furnishings from Ethan Allen
  • A 2015 GMC® Acadia Denali
  • $250,000 cash prize provided by national mortgage lender Quicken Loan"
You can enter to win here:

It sounds beautiful. It looks beautiful. Here is the official picture from their website.

As soon as I saw it, my brain turned to thoughts of how nice it would be to have a vacation home like that. We could rent it out on off weeks and have the family down and  . . . and . . .

But I am nothing if not a practical woman. I can't afford to win this house.

First, the price has a value of approximately $2,265,000. Here in the US, the federal government is going to consider that income which means you get to pay income tax on almost $2.3 million. The $250,000 in cash is just a down payment on the taxes you will need to pay. Then 45 out of 50 states also charge income tax. Between the IRS and your local state, you can expect to have to pay 40 to 50% of the value in taxes. That is anywhere from $700,000 to $1.1 million dollars you have to pay out.

You also have to worry about property taxes. Edgartown is currently $3.80 per thousand. On a $2 million property that is about $76,000 every year. You will need home insurance. That will probably cost you $5000 to $7000 a year as well. Do you need to get a burglar alarm or hire a service to take care of the house while you are gone?

Between the upfront taxes and the upkeep, there is absolutely no way I could afford to win this house. It hardly seems fair that it should cost so much to win something but that is how taxes work here in America.

Fortunately, HGTV has an alternative.The winner can decline the prize and instead take a cash sum of a little over $1 million. Even with giving half of it to the government, you can still have a lot of fun with what is left. So yes, I still entered. And if I win, I will always be a little sad that I could not keep that beautiful house but I will console myself with my hundreds of thousands of dollars.

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