- No matter how jackpot winners choose to receive their windfall — as an annuity or a one-time lump-sum payment — taxes can take a big chunk of the money.
- If someone were to win this jackpot and take the cash option of $403.8 million, a 24% mandatory federal tax withholding would shave $96.9 million off the top.
- With a top rate of 37%, however, the winner could expect to owe more.
Of course, the advertised amount is only what you’d get if you were to choose to take your winnings as an annuity spread over three decades. The lump-sum cash option — which most winners choose — for this jackpot is $403.8 million, as of midday Tuesday.
Regardless of how you’d decide to receive your windfall, taxes would take a bite out of it.
$96.9 million in taxes would be shaved off cash option
Assuming you’re like most winners and were to choose the cash option, a mandatory 24% federal tax withholding would reduce the $403.8 million by $96.9 million. That would cut your take to $306.9 million.
However, you could expect to owe more to the IRS at tax time. The top federal income tax rate is 37% and applies to income above $578,125 for individual tax filers and $693,750 for married couples who file a joint tax return.
This means that unless you were able to reduce your taxable income by, say, making large tax-deductible charitable contributions, you would owe another 13% — or about $52.5 million — at tax time. That would bring your winnings down to $254.4 million.
There also could be state or local taxes depending on where the ticket was purchased and where you live. Those levies range from zero to more than 10%.
Most Mega Millions players, though, won’t have to worry about paying millions of dollars to the IRS or state coffers: The odds of a single ticket matching all six numbers to land the jackpot is about 1 in 302.6 million.
Meanwhile, the Powerball jackpot is $291 million (with a cash option of $147.9 million) for Wednesday night’s drawing. The chance of hitting the motherlode in that game is slightly better: 1 in 292 million.
