Winning the 2018 HGTV Dream Home in Gig Harbor, Washington Will Cost You in Income Taxes . . . But Not as Much Thanks to the Trump Tax Cut

Dec 29, 2017

HGTV 2018 Dream Home in Gig Harbor, Washington.JPG

This year’s 2018 HGTV Dream Home is in Gig Harbor, Washington (see Google map at end of post). According to the HGTV contest rules, it comes with the home and furnishings ($1,5962,481), $250,000 in cash, and a 2018 Honda Accord ($33,870) for a total prize value of $1,876,351.



Of course, the $250,000 in cash will come in handy, because if you win the 2018 HGTV Dream 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.


If you win the 2018 #HGTVDreamHome in #GigHarborWA, be prepared for a hefty federal & state #incometax bill @keypolicydata (Click to Tweet)


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.


As they state in the rules: All costs, taxes, fees, and expenses associated with a prize or the acceptance and use of any element of a prize not specifically addressed above are the sole responsibility of the winner. All federal, state, and local taxes on prize are winner’s responsibility. The Grand Prize Winner will be issued a 1099 tax form for the ARV of the prize.”


Overall, the federal income tax bill alone comes to a whopping $624,749 (see assumptions below) or 33.3 percent of the prize value—which is significantly lower thanks to the Trump tax cut (see information on tax cut below).


If you plan on keeping this home, you should be prepared to take on a second job or take out a home equity loan to pay Uncle Sam as the $250,000 in cash won’t cover it (no wonder Quicken Loans is sponsoring the cash award . . . they will be right at your side when you realize you need a loan).


Click here to view tax burden data by state, type of tax, and for years 1950 to 2015.


Calculating the state income tax owed is much more complicated. 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.


However, Washington does not have an individual income tax—which is the primary reason why Washington has the 15th lowest tax burden in the country (as a percent of private sector personal income).



As such, the state income taxes you will pay if you win will solely be the income taxes levied by your home state, as shown in Table 1, unless you live in the nine states, including Washington, that do not have an individual income tax--Alaska, Florida, Nevada, New Hampshire, South Dakota, Texas, Tennessee, and Wyoming.


Who is the real winner of the #HGTVDreamHome contest--the contestant or the government? @keypolicydata (Click to Tweet)


As shown in Table 1, the worst state to live in is California with combined federal and state income tax bill of $849,537, or 45.3 percent of the prize value. Following closely behind are Hawaii (combined tax bill of $818,559, 43.6 percent of the prize value), and Minnesota (combined tax bill of $799,129, 42.6 percent of the prize value).


 Table 1 Federal and State Individual Income Tax Bill for Winning the 2018 HGTV Dream Home in Gig Harbor, Washington.jpg


Fortunately, HGTV does provide an escape hatch by offering cash in lieu of taking possession of the home worth $750,000 and you keep the $250,000 in cash and Honda Civic for a total value of $1,033,870. Again, as shown in Table 2, the worst states to live in are the same as above—California (combined tax bill of $425,769, 41.2 percent of the prize value), Hawaii (combined tax bill of $414,168, 40.1 percent of the prize value), and Minnesota (combined tax bill of $404,427, 39.1 percent of the prize value).


 Table 2 Federal and State Individual Income Tax Bill for Taking the Cash-Option on the 2018 HGTV Dream Home in Gig Harbor, Washington.jpg


There is no clear-cut answer as to whether or not to keep the house, take the house and sell it, or opt for the cash value. If you look at the last two options, you might net more after-taxes if you take the house and sell it yourself—of course you hope the appraised value is close to the real market value at the time of sale which adds a degree of riskiness. Additionally, you may have issues with the Capital Gains tax which will further reduce the attractiveness of the sell-it-yourself option.


Renting the home is further complicated by local zoning ordinances.


Click here to view tax burden data by state, type of tax, and for years 1950 to 2015.


However, if you decide to keep the home it is very likely that you will need to take a second mortgage on the house (unless you have a few hundred thousand just lying around) to pay the tax bill. Using the worst case scenario (California), a $599,537 ($849,537 minus the $250,000 in cash) mortgage over 30 years at 4 percent interest would cost you about $2,862 a month.


The high #incometax bill begs the question—have you really won the #HGTVDreamHome home or a sizable mortgage to pay the #IRS? @keypolicydata (Click to Tweet)


My suggestion would be to take the cash option 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 move to the one state like the Free-Staters have done 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, 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 icalculator) to make a more precise estimate.


Tax assumptions: The tax analysis uses a married couple with two children taking the standard deduction and is based on 2017 law for state estimates.


Additionally, the recently enacted tax cuts under President Donald Trump will go into effect for the 2018 calendar year. Since the HGTV Dream Home will be awarded in 2018, the winner will pay their federal income taxes under the reformed tax code (as shown in Tables 1 and 2).


Key changes in the tax code due to the Trump tax cut that impacts this analysis:

  • Lowers most of the income tax rates with the top tax rate reduced to 35 percent from 39.6 percent. Tax bracket widths were also modified.

  • The standard deduction is nearly doubled from $13,000 to $24,000 for a married couple.

  • Personal exemptions were eliminated, but the child tax credit was doubled to $2,000 from $1,000 per child.


Overall, I have estimated that these tax changes will save the HGTV Dream Home winner $54,074, if they keep the home, thus paying $624,749 to the IRS instead of $678,824. If the winner takes the cash-option, they would save $32,170 thus paying $313,031 to the IRS instead of $345,201.


Click here to view tax burden data by state, type of tax, and for years 1950 to 2015.



Also, check out our tax analysis of the recent 2017 HGTV Urban Oasis, 2017 DIY Ultimate Retreat, HGTV 2017 Smart Home, HGTV 2017 Dream Home, DIY Network 2016 Blog Cabin, HGTV 2016 Smart Home, HGTV 2016 Dream Home, HGTV 2015 Urban Oasis, 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.



Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 65 years! See if your state has been above or below the national average?



Category: HGTV

J. Scott Moody

Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.

blog comments powered by Disqus

Check Out Our Unique Apps:

U.S. Capitol.jpg

Government Workforce

Tax Squeeze.jpg

Tax Burden

Strings Attached to Federal Dollars.jpg

Federal Tax and Spend

Hundred Dollar Bill.jpg

Cost of Living (COLI)



Measuring a Dollar.jpg

Federal Tax & COLI


Federal Pension

United States Office of Personnel Management Seal.jpg

Federal Payroll

Check Out All Posts For Your State:

Alabama.jpg  Alabama

Alaska.jpg  Alaska   

Arizona.jpg   Arizona 

Arkansas.jpg  Arkansas

California.jpg  California

Colorado.jpg  Colorado

Connecticut.jpg  Connecticut

 Delaware.jpg  Delaware

Florida.jpg  Florida

 Georgia.jpg  Georgia

Hawaii.jpg  Hawaii

  Idaho.jpg  Idaho

   Illinois.jpg  Illinois

   Indiana.jpg  Indiana

  Iowa.jpg  Iowa

  Kansas.jpg  Kansas

  Kentucky.jpg  Kentucky

   Louisiana.jpg  Louisiana

   Maine.jpg  Maine

  Maryland.jpg  Maryland

Massachusetts.jpg  Massachusetts

Michigan.jpg  Michigan

Minnesota.jpg  Minnesota

  Mississippi.jpg  Mississippi

Missouri.jpg  Missouri

Montana.jpg  Montana

Nebraska.jpg  Nebraska

Nevada.jpg  Nevada

New Hampshire.jpg  New Hampshire

New Jersey.jpg  New Jersey

New Mexico.jpg  New Mexico

New York.jpg  New York

North Carolina.jpg  North Carolina

North Dakota.jpg  North Dakota

Ohio.jpg  Ohio

Oklahoma.jpg  Oklahoma

Oregon.jpg  Oregon

Pennsylvania.jpg  Pennsylvania

Rhode Island.jpg  Rhode Island

South Carolina.jpg  South Carolina

South Dakota.jpg  South Dakota

Tennessee.jpg  Tennessee

Texas.jpg  Texas

Utah.jpg  Utah

Vermont.jpg  Vermont

Virginia.jpg  Virginia

Washington.jpg  Washington

West Virginia.jpg  West Virginia

Wisconsin.jpg  Wisconsin

Wyoming.jpg  Wyoming