he Mega Millions lottery jackpot surpassed ten figures Tuesday after no ticket matched all six numbers drawn, pushing Friday’s potential winnings up to $1.025 billion—but because of taxes, the winner will take home significantly less cash.
Mega Millions winners can either take 30 annual payments over 29 years or an immediate cash lump sum, which most winners opt for.
The estimated cash option will come out to $602.5 million, and the prize would be subject to an initial 24% federal tax withholding, or roughly $144.6 million.
The winner would also owe additional taxes at higher brackets, up to the 37% top federal marginal tax bracket for ordinary income: For a single taxpayer with no additional income, no dependents and no itemized deductions (like large charitable contributions), the total additional additional tax would be another $78.3 million due, leaving the winner with $379.6 million before state taxes.
The annuity option provides the full $1.03 billion in winnings over 30 annual payments of $34.1 million on average—but again, that’s before taxes.
While the 24% federal tax withholding still applies, it amounts to $8.2 million annually, and the additional federal tax (for a single taxpayer with no other income, at today’s rates, which are likely to change) would come to another $4.4 million, leaving the winner with $21.5 million per year, before state taxes.
State taxes vary, and while some states don’t tax lottery winnings (including those with no state income tax, like Texas and Florida, and those that specifically exempt lottery winnings, like high-tax California), state income taxes can be as high as 10.9% in New York.
In some states, cities are allowed to impose their own income taxes, and in New York City the top rate is an additional 3.87% on top of the state and federal taxes.
If there is a winning ticket Friday, the jackpot would be the third-largest in Mega Millions history, and the third time the prize has exceeded $1 billion. The largest in history was a jackpot of nearly $1.54 billion in 2018. The odds of winning the jackpot by matching all six numbers is approximately 1 in 302 million. This jackpot's run began in April, and the next drawing will take place Friday at 11 pm EST.
Mega Millions: Do This If You Win The $810 Million Lottery Jackpot (Forbes,
Credit: www.forbes.com /