St Jude Home Question (1 Viewer)

[jrdbrn]

If I were to somehow win this home valued at $575,000, roughly how much would the taxes be?

This was a conversation with some friends the other day and most people say the average person can't pay the taxes on prizes so high, but isn't it 10%?

 

[FullMonte]

No....it's considered income, so it will be taxed at your tax rate.

Assuming a 30% tax rate (which I have a feeling this would push you up into the area of), that would be around $200k.

Which brings up an interesting scenario....You win a house worth $575,000, and you have to pay the taxes on it. Can you get a mortgage on the house to pay the taxes? After all, you don't own it yet. I seem to remember hearing that you have to pay the taxes in order to claim the prize.

Or...an even more interesting scenario...What if someone wins the $575,000 house, and owes $200k in taxes....but that person's credit isn't good enough to qualify for a mortgage (even with the equity)?

 

[wizard1183]

Cant you just take a loan out on the taxes for the home as most banks should finance it, Upon receiving the loan put the house up for sale for $475k, pay off your $200k loan and keep close to $275k.

 

[wizard1183]

No....it's considered income, so it will be taxed at your tax rate.

Assuming a 30% tax rate (which I have a feeling this would push you up into the area of), that would be around $200k.

Which brings up an interesting scenario....You win a house worth $575,000, and you have to pay the taxes on it. Can you get a mortgage on the house to pay the taxes? After all, you don't own it yet. I seem to remember hearing that you have to pay the taxes in order to claim the prize.

Or...an even more interesting scenario...What if someone wins the $575,000 house, and owes $200k in taxes....but that person's credit isn't good enough to qualify for a mortgage (even with the equity)?

Then I guess you wont be getting the house you won lol

 

[jrdbrn]

That's interesting. I thought it would be a 1099-MISC. Are there limits? I know it isn't the same, but I won a trip a few years ago worth over $3k and received a 1099-M. I think the taxes were only around 10% owed.

 

[ok awesome]

Cant you just take a loan out on the taxes for the home as most banks should finance it, Upon receiving the loan put the house up for sale for $650k, pay off your $200k loan and keep close to $450k.

Yo dude do you have any tips on how to sell houses that appraise for $575k for $650k? That sounds like a money making idea there.

 

[wizard1183]

Yo dude do you have any tips on how to sell houses that appraise for $575k for $650k? That sounds like a money making idea there.

Sorry, I misread it and was using $750k appraisal.

If you read, the said house won was appraised at $575k. I reduced it $100K in hopes of selling it quicker. A home that appraises at $575k, trying to just sell it when its USED in this housing market is pretty hard to do. Since this is a brand new home appraised at said $575, Id assume $475 it may sell quicker. If need be, you could reduce the price accordingly in hopes of selling it faster to pay off the loan and have the money to you in a short amount of time. Idk? I do know somethign appraised at that much basically handed to you for a (small) fee should yeild yourself a profit of at LEAST $200k on the small end. Regardless, you're standing to net a profit. This is different than just trying to sell a home unless the home was "given" to you.

 

[Lurkaholic]

If you read, the said house won was appraised at $750k. I reduced it $100K in hopes of selling it quicker. A home that appraises at $550-650k, trying to just sell it when its USED in this housing market is pretty hard to do. Since this is a brand new home appraised at said $750, Id assume $640 it may sell quicker. If need be, you could reduce the price accordingly in hopes of selling it faster to pay off the loan and have the money to you in a short amount of time. Idk? I do know somethign appraised at that much basically handed to you for a (small) fee should yeild yourself a profit of at LEAST $250k on the small end. Regardless, you're standing to net a profit. This is different than just trying to sell a home unless the home was "given" to you.

If I were to somehow win this home valued at $575,000, roughly how much would the taxes be?

This was a conversation with some friends the other day and most people say the average person can't pay the taxes on prizes so high, but isn't it 10%?

 

[wizard1183]

I edited it. Read

 

[CajunSaint]

The answer to the question is that you pay normal ordinary income tax rate which would approximately 1/3 of the 1099 value.

You would have to get a mortgage on the home almost immediately which would essentially pay your taxes. Or do as other said, put it up for sale and pay off the taxes from your disbursements.

Not such a free house now, is it!?

 

[CajunSaint]

Oh...and dont forget about roughly 5% for state taxes.

 

[FLIPPY]

I just won my nightmare home......

Just wait till they get those yearly property tax bills...
and if you sell it, you get to pay capital gains taxes...

Gotta love the government.....

 

[tomdda]

Gotta love the government.....

Uh, no. No you don't. (Yes, I know it was sarcasm)

 

[buzd]

if you sell it, you get to pay capital gains taxes...

Not necessarily...

 

[ok awesome]

The answer to the question is that you pay normal ordinary income tax rate which would approximately 1/3 of the 1099 value.

You would have to get a mortgage on the home almost immediately which would essentially pay your taxes. Or do as other said, put it up for sale and pay off the taxes from your disbursements.

Not such a free house now, is it!?

Not if you have the tax money in cash.

I'll let you guys know all about the process after I win.

 

[gwballin]

As others have mentioned, winning the house would be considered ordinary income and therefore be taxed at your ordinary income tax rates. Because of that it is not just as easy so say XX% since you have to factor in all of your other ordinary income, deductions, etc.

That said, the highest federal marginal tax rate for 2013 is 39.6% which starts to kick in once taxable income hits $400k for single filers and $450K for married (filing jointly).

The highest Louisiana marginal tax rate for 2013 is 6% which starts to kick in once taxable income hits $50k for single filers and $100K for married (filing jointly).