Winning the HGTV Urban Oasis Home 2015 in Asheville, North Carolina Will Cost You in Income Taxes

Aug 11, 2015

HGTV 2015 Urban Oasis Home in Asheville, North Carolina.JPG


This year’s HGTV Urban Oasis Home 2015 in Asheville, North Carolina. According to the HGTV contest rules, it comes with the home and furnishings ($490,395), $50,000 in cash, and a 2016 Acura TLX SHAWD ($45,720) for a total prize value of $586,115.


Of course, the $50,000 in cash will come in handy because, if you win the 2015 HGTV Urban Oasis Home, you will need to be prepared for a hefty federal individual income tax bill and, depending on where you live, a state individual income tax bill—both of which I have estimated in this post.




This analysis excludes the multitude of other taxes such as any real estate, deed or transfer taxes and, most especially, the property tax which you pay year, after year, after year . . . well, you get the picture. That said, don’t underestimate their importance as the recent winner of the 2015 HGTV Smart Home in Austin, Texas is selling the house citing high property taxes as the reason.


As they state in the rules: “Real estate transfer taxes, deed recording charges, closing costs , current and future real estate taxes, title insurance, homeowner’s hazard and liability insurance, and all other taxes, costs, fees, and expenses related to the maintenance of the house shall be the responsibility of the Grand Prize Winner commencing as of the date the Grand Prize Winner accepts the Grand Prize.”


Overall, the federal income tax bill alone comes to a whopping $168,687 (see assumptions below) or 28.6 percent of the prize value. If you plan on keeping this home, best be prepared to take on a second job or take out a home equity loan to pay Uncle Sam as the $50,000 in cash won’t cover it.


Calculating the state income tax owed is much more complicated. North Carolina does have a general individual income tax. As a result, your tax bill will first be determined by North Carolina’s individual income tax. Your home state provides a tax credit for income taxes paid to another state so you may owe additional income taxes if your home state levies a higher tax bill. If you think that sounds complicated, just imagine what professional athletes go through paying the "Jock Tax" (income tax) to every state they play in.


Table 1 shows the state individual income tax bill that would be owed to Idaho ($67,735) and any additional taxes owed to your home state (if different). If you live in the nine states that do not have an individual income tax--Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming—then your tax bill is simply the combined bill for Uncle Sam and North Carolina ($200,526). Additionally, there are 28 other states whose income tax bills are lower than North Carolina’s tax bill so you would not owe anything additional.


Table 1 Federal and State Individual Income Tax Bill for Winning the HGTV 2015 Urban Oasis in Asheville, North Carolina.jpg


However, 22 states have bigger income tax bills than North Carolina so if you live in one of those states expect to pay more. The worst state to live in is Oregon with an additional tax bill of $21,990 which brings the combined state and local tax bill to $222,517, or 38 percent of the prize value. Following closely behind are Hawaii (combined tax bill of $219,930, 37.5 percent of the prize value) and Iowa (combined tax bill of $218,044, 37.2 percent of the prize value).




Oddly, HGTV does not provide an escape hatch by offering cash in lieu of taking possession of the home unlike many of the previous HGTV contests.


The large #incometax bill kind of makes you wonder who the real winner of the #HGTVUrbanOasis contest is--the contestant or the government? (Click to Tweet)


There is no clear cut answer as to whether or not to keep the house or take the house and sell it. You might net more after-taxes if you take the house and sell it yourself, but, of course, you are risking that the appraised value is close to the real market value at the time of sale. Additionally, you may have issues with the Capital Gains tax which will further reduce the attractiveness of the sell-it-yourself option.


However, if you decide to keep the home it is very likely that you will need to take a home equity loan on the house (unless you have a few hundred thousand just lying around) to pay the tax bill. Using the worst case scenario (Hawaii), a $169,930 ($219,930 minus the $50,000 in cash) home equity loan over 30 years at 4 percent interest would cost you about $811 a month. Though this begs the question—have you really won a house or a mortgage?


My suggestion would be to sell the house for whatever you can get for it and outright buy a nice home with the cash and have zero debt. And if you have had your fill of paying taxes, you could mimic the Free-Staters and buy a house in the handful of America’s tax havens left (all in New Hampshire) where there are no state and local individual income taxes, no state or local sales taxes and very low (in some case no) local property taxes.


Or, if New Hampshire is not your style, you can check out the tax burdens in other states with our unique tax burden app which shows tax burdens by state, by county, by type and over time. If your tax situation is more complicated than what is shown here, you can use this individual income tax calculator (thanks to tax-rates.org) to make a more precise estimate.


Also, check out our tax analysis of the recent DIY Network 2015 Blog Cabin, HGTV 2015 Smart Home, HGTV 2015 Dream Home, HGTV 2014 Urban Oasis, DIY Network 2014 Blog Cabin, HGTV 2014 Dream Home and HGTV 2014 Smart Home.


Tax assumptions: The tax analysis uses a married couple with two children taking the standard deduction and is based on 2014 law. The winner will be paying taxes based on 2015 law which, especially at the state level, may be different if new tax laws have taken effect. Also, the federal government and most states adjust many elements for inflation which would result in a slightly lower tax bill than reported here.



Category: HGTV

J. Scott Moody

J. Scott Moody has over 18 years as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.


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