I guess being they have no house note they can afford the taxes

The tax is not nearly as high as a mortgage payment would be.

Several family's have actually ended up in litigation over this very fact with the show's producers. Long story short, many can't afford the taxes and attempt to sell which presents a helluva lot of red tape.

I thought property tax was set from the original purchase price?

Good point; I wonder if this is considered new construction though.

Where I live they reassess every couple of years due to inflation...so they get more tax money

Also if you demolish a house and then rebuild, it triggers a reassessment.

Plus, if the families ever want to sell, they'll never get what the homes are worth since they're not in the best of neighborhoods.

I think the program is great! They dont fix up the places for resell. They fix them up so people can have a safe and functional place to live. I know if I were in many of these peoples shoes I would be happy like they all are when they get the fixed up place to live.

it's a great question Andrew. i have heard some horror stories (people who can't use or can't afford what's given to them), but nothing to prove it - and i'd be curious to learn more.

on the topic, i was sickened in an episode i saw that there was perfectly usable furniture (just not trendy or whatever), literally *crushed* and destroyed. why not at least donate that stuff to a local charity?

the show doesn't seem to be fully thinking through the consequences of their actions. but i think the basic lottery model and extremity of the show, like so many others lately, is more disturbing than the details.

I agree with gooch and zina...

In the beginning, the show renovated the houses, to make them more safe and functional for the family's needs. It was a great service and heartwarming entertainment. But then because it became popular, it had to keep one-upping itself. The emphasis shifted from Makeover to Extreme.

I too have cringed at the sight of good fixtures and products in the house being trashed. And why don't they make it energy-efficient every time? I only recall once or twice that they installed solar panels or geothermal climate systems. And the first thing I always wonder when they walk into the new house is, how are they gonna keep it clean? Vaulted ceilings, thousands of square feet, I couldn't keep up with it.

I haven't watched in a long time, because it's become about promoting the products they're installing, promoting the celebrities and businesses that participate in each episode, and manipulating the viewers' emotions. It also makes viewers, especially the younger, more impressionable ones, think that having all that neato stuff makes life better.

I don't recall that every family gets the mortgage paid for, I only remember some episodes where collections were taken or the builders pitch in, or so on. I hadn't thought about the tax increase. That goes up enough as it is, I can see that it could lead to a hardship for these families. Maybe one of the other networks should do a follow-up special!!! Like one I saw once with people who had one big lottery jackpots and how empty their lives had become.

As if providing free home renovations to these families was not enough, ABC has
done so in what it considers to be a tax-free manner. Under section 280(A)(g) of the Internal Revenue Code, if a taxpayer uses a dwelling as a residence and rents that dwelling to a lessee for a period of less than fifteen days, the rental payments are not included as income for tax purposes. It may be stating the obvious to say that giving designers, contractors, and construction workers access to a house for a week to perform home improvement-related tasks does not seem like the typical tenancy. But ABC does actually "rent" each family's house for the week that its crew is on site.In lieu of making rental payments in cash, ABC pays the $50,000 rent in appliances, furniture, and electronics, such as television sets and refrigerators. Further, since ABC is the tenant of the property, any improvements made to the home are tax-free to the owner under section 109 of the Internal Revenue Code. Ultimately, the featured families receive hundreds of thousands of dollars worth of renovations with no tax onsequences, which,absent a creative tax strategy, they would otherwise be forced to treat as taxable income.

Great answer, earhartc! But what about when they demolish a house and rebuild it? Does the same IRS code apply?

@zina

I have no proof to support this, but I would speculate that the perfectly usable furnishings that could be donated to local charity may not, in fact, be perfectly usable. They could have broken supports or hidden flaws or damage. A number of the shows I’ve seen over the past years featured residences that were terribly befouled by mold and mildew. That stuff would contaminate everything within the structure, no matter how small, even the personal belongings that they later return to the new residences. I have seen a few shows where doors and fixtures were salvaged for Habitat for Humanity. I would speculate that this may be included in the paperwork the families have to sign before proceeding with the makeover. Perhaps it is an option in some cases and the families either feel their furnishings were unfit for recycling or these disclosures went by them so fast they couldn’t process all of it or maybe they didn’t care. We probably shouldn’t assume the worst of the recipients, since they probably have little control over what ABC decides to do for the cameras.

The property may indeed be exempt from Income Tax due to the loophole mentioned, but I don’t see any way of getting around the local, city property tax assessment. Still interested if someone can answer that question.

Ha ha, good question, well, how much more is it going to be? There usually not really poor people, just sort of stuck, on hard times maybe, whatever that is,. Me personally I’ve been below the poverty line for years, so I’m totally talking out of my neck. They could always take out some equity, now since there house is worth more. And its the house that improves so the land wouldnt factor in. Deuces

Sat down for lunch with one of the producers of the show this past week while volunteering and he said that they make a deal with the state. The family’s pay no more property tax on the new house then they did on the old house. They also get around the gift tax of the house somehow!

@jennryden: great answer. Welcome to Fluther.