The Mega Millions jackpot has climbed to $1.15 billion forward of Friday’s drawing, making it the fifth-largest prize within the recreation’s historical past.
But how a lot you’ll really take residence could possibly be lower than half that, relying each in your alternative of payout and the way a lot you’ll owe in federal and state taxes.
Everyone owes federal taxes on lottery winnings. While an computerized 24% is withheld upfront, you’ll nearly actually owe a complete of 37% when submitting your 2024 tax return, as successful a billion {dollars} would put you within the high tax bracket.
State taxes on lottery winnings within the U.S. typically vary from 3% to six%, with New York imposing the very best fee at 10.9%. However, eight states don’t tax lottery winnings in any respect:
- California
- Florida
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If you reside in any of those states, you’ll take residence the utmost payout. That works out to $325,184,812 as a money lump sum, or a 30-year annuity totaling $725,754,360, in accordance with usamega.com.
While the money payout is way lower than the annuity, winners often take the lump sum since they get extra money immediately.
Compared with the taxes you may pay within the state of New York, that’s a distinction of $125,349,990 for the annuity and $56,254,900 for the money lump sum.
Where you purchase the ticket additionally issues, as a successful ticket bought out of state could possibly be topic to that state’s taxes. In most instances, your house state would require you to report out-of-state winnings however will often give you a credit score or deduction for taxes paid to the opposite state.
State lottery tax legal guidelines differ, so in the event you win a lottery prize in a state apart from your individual, seek the advice of a tax skilled. They may also aid you decide the most effective payout choice based mostly in your monetary objectives.
The subsequent Mega Millions drawing is Friday, December 27, 2024, at 11 p.m. ET.