What percentage of winners live in these dream homes?
By Paul Adler
Published: Feb. 22, 2023 at 8:22 PM CST
SPRINGFIELD, Mo. (KY3) - Tickets for the 2023 St. Jude Dream Home will go on sale in April. The home will be built again in Republic. One of our viewers wants to know, ‘What percentage of winners take possession of and live in these dream homes?’
Hundreds of people reserved a $100 ticket for the 2022 home. The home was valued at $680,000.
St. Jude tells you upfront that the home’s taxes are the winner’s responsibility. This is something that the IRS requires for prizes valued at greater than $5,000.
“Winners are encouraged to consult a tax professional,” says Scott Ellis with the Children’s Research Hospital. “Many factors come into a winner’s choice to move into or sell the home, which ultimately comes down to their personal preference. Regardless, winning the St. Jude Dream Home Giveaway house can be life-changing for both ticket buyers and the kids of St. Jude.”
“You must assess if you will have enough cash to pay the taxes.” wrote Attorney Catherine Moore of Kirkland, Woods, and Martinsen. “If not, you need to consider the ways you can generate cash to pay the taxes. Some options include; selling your current home or other assets, selling the Dream Home, or taking out a loan. It will be important for you to consult your CPA, financial advisor, and lawyer for specific advice about your specific situation.”
St. Jude told us around 70% of the winners turn around and sell their homes for a profit. The other 30% will move in. The spokesperson tells us this is the average from the last three years.
Returning to the viewer’s question, What percentage of winners live in these dream homes? In the last three years, it’s about 30%. We can also say it’s an honor to win. You help children when you participate. But winning does come with tax consequences.
Attorney Catherine Moore had a detailed response for things winners should consider. This is the full text of her thoughts:
First, congratulations to the winner of Dream Home!
Do you have to pay taxes on the Dream Home? Can you shield yourself in any way?
As the winner of the Dream Home, you will be subject to several different types of taxes (e.g., federal income tax, state income tax, and real estate taxes). The Approximate Retail Value (ARV) of the Dream Home (and its furnishings if included with the prize) is considered income for the year in which you win the Dream Home. The organization transferring the Dream Home to the winner will send the winner a 1099 for the winnings. Because the ARV will be included in your income, your tax bracket will change for the year. If you accept the prize, there really is no way to shield yourself from the income tax.
If not, what’s the best plan of action? Do you take out a mortgage to pay the taxes? Should you sell the home?
While the tax will not be due immediately, you need to be aware that both your income and tax bracket will change for the year of the winnings, and the taxes will be due by April 15th of the following year. You must assess if you have enough cash to pay the taxes when due. If not, you need to consider ways in which you can generate cash to pay the taxes. Some options include: selling your current home or other assets, selling the Dream Home, or taking out a loan. If you choose to sell the Dream Home, you would want the sale to close prior to the tax deadline so that you have the cash to pay the tax. Again, you need to consider the tax and financial impact of all of these choices. It will be important for you to consult your CPA, financial advisor, and lawyer for specific advice about your specific situation.
Should you consider not taking possession?
Once you consider the financial and tax implications of winning the Dream Home, you could choose to decline the prize. However, if you accept the prize but never move into the Dream Home, you will still have to include the ARV as income. Before deciding, you should consult your CPA, financial advisor, and lawyer for specific advice about your situation.
Winning the Dream Home should be a blessing for you and your family, and with proper planning and awareness, it can be!
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