Topline
The Mega Millions jackpot rose to around $940 million after no one won Tuesday night’s draw, making it the sixth-largest reward in U.S. history, though the eventual winner will take home a far smaller amount after paying out a hefty tax bill.
Mega Millions sing and lottery tickets are seen at a store in Burlingame, California, United States.
Key Facts
The Mega Millions winner can choose to receive the cash in 30 installments of the estimated $940 million over the next 29 years—or the more popular option of a much smaller lump sum payment of $483.5 million.
If the winner chooses the $483.5 million lump sum, they will face a mandatory federal tax withholding of 24%, leaving them with $367.46 million.
The winner would then have to pay income tax at the top federal marginal rate of 37%—unless they manage to claim large deductions through things like charitable donations—which means they will have to set aside around $136 million, leaving them with $231.46 million before state taxes and other deductions.
If the winner chooses installments, they would receive an immediate payout of $31.33 million before taxes, followed by the same amount every year for the next 29 years.
The 24% federal withholding would also apply to the installments, totaling around $7.5 million every year, followed by a 37% federal income tax of $8.7 million—assuming they don’t claim any deductions—leaving them with around $15 million before state taxes.
What We Don’t Know
The eventual winner’s state of residence will have a big impact on the amount they get to take home due to different tax laws. New York taxes lottery winnings at 10.9% while others like Texas, Florida and California don’t tax them at all. Some states like Texas, Florida, Washington and Nevada don’t levy any state income tax.
What To Watch For
The next draw for the Mega Millions jackpot will take place on Friday and if someone has the winning numbers they would take home the sixth-largest jackpot in U.S. history.
Big Number
$2.04 billion. That was the value of a Powerball jackpot from November, which was the largest jackpot in U.S. history. The winning ticket from that jackpot was sold in California.
Further Reading
The Mega Millions jackpot climbs to $940M after no single winner is drawn (Associated Press)
California Ticket Wins Record $2.04 Billion Powerball Jackpot—Here’s How Much They’ll Pay In Taxes (Forbes)
Source: https://www.forbes.com/sites/siladityaray/2023/01/04/mega-millions-jackpot-rises-to-940-million-heres-how-much-the-winner-would-take-home-after-taxes/