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HGTV Dream Home Taxes - Could Taxes Spell the End of the Dream for Winners?

Could You Afford to Pay the Taxes on the HGTV Dream Home?

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Exterior photo of the 2009 HGTV Dream Home.

The exterior of the 2009 HGTV Dream Home in Sonoma, California.

Image © HGTV 2008, used with permission.
The 2009 HGTV Dream Home is a beautiful mansion in the wine country of Sonoma, California, a serene location where nearly anyone would want to live. The dream of winning one of these amazing houses has spurred millions of entries into the Dream Home sweepstakes each year, and the number of entrants is only expected to rise again this year. However, the dream also has a drawback – the heavy tax hit on winning such a huge prize.

The Trouble with Big Sweepstakes Wins - Paying the Taxes

In the United States, sweepstakes wins are taxed just like any other kind of income. Whether you make $30,000 working at your day job or you win a $30,000 vacation doesn't matter to the IRS – it's all income. This is fine if you happen to win cash sweepstakes and can simply deduct the taxes from your winnings; but with vacations and other prizes that are difficult to liquidate, you have to find the money to pay the taxes elsewhere.

The HGTV Dream Home Sweepstakes has an additional tax problem: not only are you hit with a heavy tax burden because the IRS treats you as if you had made an extra few million dollars of salary this year, but if you choose to keep the house, you will also be paying sizable property taxes every year. Some winners have found that just paying the utilities for such a huge house can cost thousands every month.

How Can You Pay Taxes on the HGTV Dream Home?

One idea about handling the sweepstakes taxes on the HGTV Dream Home Giveaway is to use the beautiful home to generate the money to pay for itself. This was Don and Shelly Cruz' plan when they won the 2005 Dream Home in Tyler, Texas. The Tyler Dream Home came with several buildings, including an second stand-alone house out on Lake Tyler. The Cruz family intended to sell the lake cottage or to turn the house into a Bed and Breakfast. Zoning regulations meant that neither idea panned out, however, and the Cruzes ended up having to put the Dream Home on the market.

This is why nearly every Dream Home winner has done the same thing with their windfall: they sold it. (Read how About.com readers would handle the taxes, or share your own creative ideas.)

Is the Dream Home Sweepstakes Worth Entering If You Have to Sell the House?

On the surface, it seems disappointing to win an amazing home and then have to sell it again. However, winning is an incredible, once-in-a-lifetime experience. HGTV goes to great lengths to surprise the lucky winners, they treat them like royalty when they are flown out to see the home, they can vacation in the house and enjoy all of its amenities, and they can often take the designer furnishings and extras like the car that is also awarded in the Dream Home Sweepstakes for their own.

Milton O'Bryant, in his Winner's Tale about winning the 2002 Dream Home said, "It is almost magical the first time you get to tour the house. When we arrived in Annapolis we were greeted by a wonderful staff that took care of all of our needs. You will eat the finest foods, visit the area's best attractions, and receive numerous gifts and keepsakes."

Furthermore, the HGTV Dream Home is a prestigious property that many people would love to own, meaning that it usually sells for millions of dollars. Even after paying off the taxes, smart winners have enough cash left over to live their dream, including renovating their own home or buying a new one.

In their article Is It Really a Dream Come True?, MSNBC quotes HGTV spokeswoman Emily Yarborough as saying: "Our vision of the dream is that it enables you to do what you want to do."

Enter the Dream Home Sweepstakes – But Don't Fixate on the House

If you won a sweepstakes where the prize was a million dollars cash, a vacation, appearances on television shows like Oprah, and a brand new car, you'd consider yourself very lucky indeed. However, some people call the HGTV Dream Home Sweepstakes a nightmare because of the tax burden. The important thing about this sweepstakes is not to get fixated on keeping the home, but rather to enjoy the experience and the money and other great prizes that you will receive.

As Milton O'Bryant said: "I would have loved to keep it, but I was also terribly proud to sell it. It is a strange emotion... I am proud of this sweepstakes, and I want everyone to enter. It is a chance of a lifetime that everyone should risk. What happens after you win will be what you decide is best."

What to Do if You Win the HGTV Dream Home Sweepstakes

The very first thing that you should do if you win the Dream Home Sweepstakes, or any large sweepstakes prize, is to hire an experienced accountant to help create a plan that will allow you to handle the taxes.

Read about the Experiences of a Real HGTV Dream Home Winner

For more information on this subject, read my interview with Don Cruz, the winner of the 2005 HGTV Dream Home in Tyler, Texas. Find out whether winning the Dream Home is worthwhile from someone who is in the best position to know.

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