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Tue 28 Sep, 2004 09:32 am
I watched the ending of Extreme Makeover - Home Edition. At first I thought how wonderful! This huge family of eight kids and dad (mom passed away), now has the incredible home where before this had this tiny place where the kids had to share rooms and the place was falling down around them. After everything was done they had this home that had to be worth close to a million. Then I thought, I hope they can afford the taxes on the place! According to the show, the dad has had to scale back his work hours to be available to his kids so that is why he has not had the money to pay for much needed repairs. As much as the house is great, who will pay for the taxes? Will they end up losing this beautiful new home because the taxes are beyond their reach? Do the TV producers/contractors even consider this when renovating these homes?
Newsweek had an article about this a few months ago. If I remember correctly they operate under a tax loophole where the show "rents" the house they are making over and the rent is paid in goods and services instead of cash.
I don't remember exactly how it works but if I can find the arctilce I'll get the details...
That was easy...
Newsweek: "It's common knowledge that lottery or TV game-show participants must pay taxes on their winnings. On 'This Old House,' homeowners routinely pay taxes on donated products. But the producers behind ABC's 'Extreme,' which picks cash-strapped families for a seven-day home renovation, think they've found a way around the taxes. According to documents obtained by NEWSWEEK, the show leases participants' homes, paying $50,000 for 10 days' rental. Instead of cash, the show gives the family flat-screen TVs and appliances. Since the IRS allows tax-free rentals of less than 15 days, the homeowners don't owe taxes on their new goodies. And by renting the home from the family, producers apparently believe the renovations are tax-free under a 'leaseholder improvement' loophole."
Thanks! I do feel much better now. I was thinking what a thoughtful and great thing to do and then oh no, how the h*ck could they afford the taxes. I will be able to sleep better tonight.
Income tax issues aside, the increased value of the home will surely drive up the PROPERTY taxes of these homes. If the families are cash-strapped to begin with, an increase of several thousand $ PER YEAR in property taxes will be a hard bullet to swallow.
And what about the annual maintenance and insurance on the new home? More expensive homes with more expensive toys means you have to pay higher insurance rates and possibly even security to protect your assets (now that all your goodies have been broadcast to millions of viewers).
I'd recommend selling the home and buying something whose annual taxes, maintenance, and insurance you can afford.
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