what would the tax requirements be if you won a house in an essay contest?

Question

any/all info. types/how paid/loop holes

how would it affect my liabiity, If on s.s. only w/ no assets ? would a reverse mortgage be
an option?

Answer 1

You would be liable for Federal income tax based on the Fair Market Value (FMV) of the home at the time that you win and title is transferred to you. Property tax, if assessed in the local of the home, would also be assessed from that date forward. The amount of those taxes would depend on all the other factors of your tax situation but would most likely push you into a rather high tax bracket. Any adjustments ("loop holes") would depend on what you might do with the home and other assets you may have. If you live in a state that has state income tax in addition to the Federal tax you are likely to owe nearly half of the FMV of the home between the two.

Answer 2

You would be Taxed on the Cash Value of the Win. Also, you would have Real Estate Taxes to pay (unless you live in an area that doesn't charge Property Tax). I have heard that people who have won a home like this, often have to take a mortgage on part of the home to pay off the initial tax burden. However, that still leaves you with a great amount of Free Equity, and a nice new house :)

Answer 3

You would pay income tax on the value of the house at the time you won. I'm guessing the that would be in the 28% to 33% Federal tax bracket. Your state would probably tax the value as well. You can increase withholding from your job and/or made estimated tax payments to the IRS. I suspect you will need to borrow against the house to cover the taxes.

Answer 4

Also you should know your s.s. income will probably be taxable this year.

Answer 5

IF you lived in the house for 3 months at least and then YOU sold it you would,nt pay cgt or income tax ..on the profit IF ANY at sale. IF it was your principle place of residence.