The Mega Millions jackpot won’t quit just yet. The top prize for the drawing on Friday night has increased to $1.02 billion because no ticket matched all six numbers selected on Tuesday night. It is the fourth time that a lottery jackpot has exceeded $1 billion.
There is always a winner even if the chance of a single ticket finding the jackpot is around one in 302.5 million. Taxes eventually take a large bite out of any winnings, whether the windfall is collected as an annuity of 30 payments over 29 years or as an immediate, reduced cash lump amount.
The cash option for this $1.02 billion jackpot is $602.5 million, which is what the majority of winners pick. Your winnings would be lessened by $144.6 million because of a mandatory federal tax withholding of 24% on that sum.
You might expect to owe more at tax time, though, as the top federal marginal tax rate is 37%, which is applicable to income beyond $539,900 for a single taxpayer and $647,850 for married couples filing jointly.
According to the American Institute of CPAs, charitable thinking can help you pay less in taxes: You can provide financial donations to a public charity or donor-advised funds up to 60% of your adjusted gross income and receive a tax deduction for the amount in the year you make the donation. You may also establish a private foundation, make donations to it, and later decide how to use the money.
If your income did not reduce, the IRS would be owed an additional 13%, or $78.3 million ($222.9 million in total), as well.
The windfall would then be reduced to $379.6 million.
State taxes could potentially be either due or withheld. Depending on where you bought the ticket and where you live, those taxes could be more than 10%, unless you reside in a state without income tax or one in which lottery tickets are not taxed.
The profit would be more than most people see in a lifetime, even after a sizable tax bill. It is advised that jackpot winners put together a team of experts, including an attorney, financial advisor, and tax advisor, to help them manage the claiming process.
The estimated Powerball jackpot for Wednesday night’s drawing is $145 million. You have a roughly 1 in 292 million chance of winning the game’s top prize.
Mega Millions Jackpot – How much is the payout after taxes?
Even if you successfully overcome the odds, you won’t receive the whole payout. First, that is the sum winners who choose the annuity option will get over the course of 30 annual installments. However, most winners choose cash rather, and the anticipated payout for this drawing is $602.5 million.
“Some people like the idea of having something consistent over time,” but in recent years “just about everyone has chosen the cash option prize,” Kilbane said.
Federal taxes are another factor that further reduces the payout. Depending on where the winner lives, state taxes may also reduce that amount. Still a lot of money, but a smaller fortune.
Additionally, it doesn’t take into account the chance that another player would have the winning combination, in which case even the lower rewards would need to be divided by two or more, depending on how many lucky players there were.
Along with 45 states, Washington, D.C., and the US Virgin Islands, Mega Millions is also played there. State lotteries are in charge of organizing the game.
Chances of Winning the Mega Millions Jackpot
According to Lottery USA, the chances of winning the Mega Millions jackpot are one in 302.6 million, and the odds to win the Powerball jackpot are one in 292.2 million.
On January 22, 2021, a group of four gamers in Michigan won a $1.05 billion prize.
The biggest Mega Millions jackpot in history—$1.537 billion—was won on October 23, 2018, with a ticket purchased in South Carolina.