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No, you didn’t get the $ 520 million Mega Millions prize.
The top prize in the lottery game has risen to a whopping $ 600 million for Tuesday night’s draw, after no ticket matched the six numbers drawn Friday night. The amount marks the eighth largest prize in the history of the lottery. And Powerball’s biggest prize, meanwhile, is estimated to be $ 470 million for Saturday night’s draw.
Of course, the amounts announced are not what the winners would end up with. Lottery officials must withhold 24% of major federal tax wins. And that’s just the beginning of what you’ll pay Uncle Sam and usually state coffers.
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For the $ 600 Million Mega Millions prize, the cash option (which most winners choose instead of an annuity) is $ 442.4 million. The 24% withholding would save you about $ 106.2 million before the prize reaches you.
However, you can count on more duty in the IRS.
The marginal tax rate on higher income is 37%. If there were no reduction in the winner’s taxable income (such as large charitable contributions), another 13%, or $ 57.5 million, would be due to the IRS at the time of the tax (which would be in April 2022 for the awards claimed in 2021).
That would total $ 163.7 million for the IRS.
State taxes would be on top of that. Depending on where you live, this success could exceed 8%.
Meanwhile, for the $ 470 million Powerball prize, the cash option is $ 362.7 million. If there is a winner, the 24% federal withholding would save $ 87 million. Another 13% would be $ 47.2 million, for a total of $ 134.2 million for the prosecutor.
Despite delivering a considerable amount to federal and state coffers, the after-tax amount would change lives. Experts say big prize winners should bring together a team of experienced professionals, including a lawyer, a tax advisor and a financial advisor, to help navigate their sudden wealth.
However, most players don’t have to worry. The chance of getting the Mega Millions prize with a single ticket is tiny: 1 in 302 million. For Powerball, the odds are slightly better: 1 in 292 million.