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Eyeballing that Mega Millions jackpot? Good ol’ Uncle Sam is, too.
After more than two months of twice-weekly drawings with no one matching all six numbers, the top prize has climbed to $367 million for Tuesday night’s drawing. The last jackpot won was on March 12, for $50 million.
Of course, the advertised amount isn’t what winners end up with.
Whether they take the prize as an annuity spread out over three decades or as an immediate, reduced lump sum, 24% is withheld for federal taxes. However, the top marginal tax rate of 37% means owing a lot more to the IRS at tax time. State taxes typically are due, as well.
Largest U.S. lottery jackpots
|Rank||Amount||Date won||Game||Winner locations|
|1||$1.586 billion||Jan. 13 2016||Powerball||CA-FL-TN|
|2||$1.54 billion||Oct. 23 2018||Mega Millions||SC|
|3||$768.4 million||March 27 2019||Powerball||WI|
|3||$758.7 million||Aug. 23 2017||Powerball||MA|
|5||$687.8 million||Oct. 27 2018||Powerball||IA-NY|
|6||$656 million||Mar. 30 2012||Mega Millions||KS-IL-MD|
|7||$648 million||Dec. 17 2013||Mega Millions||CA-GA|
|8||$590.5 million||May 13 2013||Powerball||FL|
|9||$587.5 million||Nov. 28 2012||Powerball||AZ-MO|
|10||$564.1 million||Feb. 11 2015||Powerball||NC-PR-TX|
“If you win, just realize how big the tax bill can be and make sure you’re ready to handle it,” said certified financial planner Dan Routh, a wealth advisor at Exencial Wealth Advisors in Oklahoma City.
For Tuesday night’s Mega Millions drawing, the cash option — which most winners go with — is $228 million. The 24% federal withholding would reduce that amount by $54.7 million.
Assuming you had no reduction to your taxable income — such as large charitable contributions — another 13%, or $29.6 million, would be due to the IRS. That would be $84.3 million in all going to Uncle Sam.
This means that after federal taxes, you’d be left with $143.7 million.
Then there are state taxes, which range from zero to more than 8% depending on where the ticket was purchased and where the winner lives.
In other words, you could end up paying more than 45% in taxes.
If you’re lucky enough to win a life-changing amount in the lottery — and your chance of winning the Mega Millions jackpot is 1 in about 302.1 million — experts recommend turning to a team of professionals who are experienced in handling large windfalls. That should include an attorney, a financial advisor and a tax advisor.
“Everyone who buys a ticket dreams of winning the huge jackpot, but nobody actually thinks they will win, or has a plan in place if they do,” said Jason Kurland, a partner at Rivkin Radler, a law firm in Uniondale, New York.
Meanwhile, the Powerball jackpot is an estimated $288 million for Wednesday night’s drawing.
The last time there was a top-prize winner in that game was on March 28, when a Wisconsin man nabbed a $768.4 million jackpot. Manual Franco, who claimed his haul in late April, chose the lump sum cash option of $477 million. After federal and state tax withholdings, he received $326 million.