St Jude Home Question (1 Viewer)

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).
 
The maximum tax rate is 39.5% for income over $450,000 (MFJ). Thevalue of the house would be whatever is the assessed value. Since you indicated it was $575,000, that means the maximum tax would be $227,125.

You would have to pay tax on the assessed value, and the IRS would want the money before the end of the year. You could then sell the house for say $400,000 and pocket the difference.

Unfortunately I believe you would need to finance the house before title can be passed to you. Since you would be the "buyer" you would also have to pay any inspection and closing costs, and pro-rated property tax.
 
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The maximum tax rate is 39.5% for income over $450,000 (MFJ). Thevalue of the house would be whatever is the assessed value. Since you indicated it was $575,000, that means the maximum tax would be $227,125.

One would only have to pay the top marginal rate on the entire value of the house if one were already in the highest tax bracket.

Edit: must have skipped the "maximum" in your original post.
 
what are the taxes on the house and what do i have to do if i win it?
the irs has adopted the position that the $100 ticket price is not deductible as a charitable donation for federal income tax purposes. the irs requires that taxes on prizes valued greater than $5,000 must be paid upon acceptance and before sjcrh may deliver the prize to the winner. winners are encouraged to consult a tax professional. The taxes on the home are the responsibility of the winner. The irs requires alsac/st. Jude to collect the taxes before the transfer of property. Winners will be issued 1099s for the fair market or appraised value of the prizes they win. Winners should consult with their cpa as to specifics.



. .
 
So, here's the scary possibility

--You win the house
--You secure a mortgage for the $200,000 in taxes. You know it's a stretch, but you are going to list the house for sale, and you'll pocket the money.
--A few months go by and you struggle to make the monthly payments, while getting no offers on the house due to an overall struggling economy
--You finally fall behind on your mortgage payments, and you are stuck with two possibilities...sell the house for the balance due on the loan or get foreclosed on.
--You sell the house for $200,000 and pay off the balance.

The end result? You end up with no money, dings to your credit, and you're out the several months of payments you made...
 
One would only have to pay the top marginal rate on the entire value of the house if one were already in the highest tax bracket.

Edit: must have skipped the "maximum" in your original post.

If the value of the house is $575,000, and its value as a prize is over $450,000 (MJF) or $400,000 (S), then its value alone is more than the 39.5% threshold, irrespective of any regular salary/wages.
 
If the value of the house is $575,000, and its value as a prize is over $450,000 (MJF) or $400,000 (S), then its value alone is more than the 39.5% threshold, irrespective of any regular salary/wages.

1st - the top bracket 39.6%, just had to get that off of my chest.

2nd - if one's marginal tax bracket is 39.6% it does not mean one pays 39.6% tax on his or her taxable income. So I agree that the most in federal income tax one would pay is $227,700 but that is only if he or she is already in the highest federal income tax bracket.

Put another way, if winning a house with a value of $575,000 was one's only income he or she would pay less than 39.6% in federal income taxes even though he or she would be in the 39.6% income tax bracket since each bracket of taxable income is taxed at a different rate.

Maybe I'm misunderstanding but your post seems to suggest the entire amount would be taxed at the top marginal rate of 39.6% which just is not true unless (as I've already stated) one is already in the top tax bracket.
 
If you donate the house to St Jude to house families with children undergoing treatment your net tax effect is neutral, but the effect on your soul is not really measurable.
 
If you donate the house to St Jude to house families with children undergoing treatment your net tax effect is neutral, but the effect on your soul is not really measurable.

Unless there is a special rule for St. Jude I don't know about this generally is not the case (tax effect) since the most anyone can deduct as a charitable contribution in a given year is 50% of AGI. The rest an be carried over to subsequent years but you're still on the hook for paying a large chunk of the tax up front and taking smaller deductions in later years when your AGI is smaller since you've already recognized the income from winning the house.

*I make no judgement on the effect it has on one's soul since I'm not an expert on that subject.
 
I'm pretty sure when you donate a windfall, it never was income to begin with, as you never took possession. I think it's when folks try to keep "some" and donate the rest that they wind up with an issue. If you just turned it back to the same charitable organization giving it to you, I'm not sure how it would have any tax impact as it's the same as declining the prize.
 
So, here's the scary possibility

--You win the house
--You secure a mortgage for the $200,000 in taxes. You know it's a stretch, but you are going to list the house for sale, and you'll pocket the money.
--A few months go by and you struggle to make the monthly payments, while getting no offers on the house due to an overall struggling economy
--You finally fall behind on your mortgage payments, and you are stuck with two possibilities...sell the house for the balance due on the loan or get foreclosed on.
--You sell the house for $200,000 and pay off the balance.

The end result? You end up with no money, dings to your credit, and you're out the several months of payments you made...

Meh, real estate market is turning around, I am sure whoever wins the house won't have much trouble selling it...getting 575k on the other hand, maybe not so much.

But even if sold for 450k.. I will gladly take my $250,000ish prize for a $100 raffle ticket.

On a side note, I would so get an independent appraisal if I won, I think st Jude way overvalues the houses they build. They are nice houses, but not over 500k nice.
 
I'm pretty sure when you donate a windfall, it never was income to begin with, as you never took possession. I think it's when folks try to keep "some" and donate the rest that they wind up with an issue. If you just turned it back to the same charitable organization giving it to you, I'm not sure how it would have any tax impact as it's the same as declining the prize.

I agree you could refuse the prize and it would not be income. I think it's just a matter of semantics sine you can't donate something that you don't own and you can't own this house if you've won it without paying the tax.
 
I agree you could refuse the prize and it would not be income. I think it's just a matter of semantics sine you can't donate something that you don't own and you can't own this house if you've won it without paying the tax.


I guess at that point you would get your $100 donation for the ticket you bought.
 
1st - the top bracket 39.6%, just had to get that off of my chest.

2nd - if one's marginal tax bracket is 39.6% it does not mean one pays 39.6% tax on his or her taxable income. So I agree that the most in federal income tax one would pay is $227,700 but that is only if he or she is already in the highest federal income tax bracket.

Put another way, if winning a house with a value of $575,000 was one's only income he or she would pay less than 39.6% in federal income taxes even though he or she would be in the 39.6% income tax bracket since each bracket of taxable income is taxed at a different rate.

Maybe I'm misunderstanding but your post seems to suggest the entire amount would be taxed at the top marginal rate of 39.6% which just is not true unless (as I've already stated) one is already in the top tax bracket.

1. You're right, it is 39.6%.
2. The 39.6% would only apply for income over $450,000 (MFJ), income less than that would have a lower rate. To settle this once and for all, assuming a married couple with no children, no other income (not realistic), no deductions for Schedule A (also not realistic), and using 2012 tax tables with a maximum tax rate of 35% (2013 tables are not out yet), the taxable income would be $561,450, and the tax would be $105,062.
 

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