Mega Millions Jackpot Soars to $1.15 Billion

The anticipation for the next Mega Millions drawing is reaching a fever pitch as the jackpot climbs to an astonishing $1.15 billion, making it the fifth-largest prize in the game’s history. The drawing is scheduled for Friday, December 27, 2024, at 11 p.m. ET. But while the prize amount dazzles, winners should be prepared for a significant portion to go toward taxes.

Lump Sum vs. Annuity/Mega Millions Jackpot 

Winners of the Mega Millions jackpot can choose between a cash lump sum of $325,184,812 or a 30-year annuity totaling $725,754,360. While the annuity offers a larger total payout, most winners opt for the lump sum for immediate financial flexibility.

However, the decision comes with tax implications. The federal government withholds 24% upfront, but winners in the highest tax bracket—earning over $578,125 annually—will ultimately owe 37%. This means a lump sum payout could shrink to around $204 million after federal taxes alone.

State Taxes

In addition to federal taxes, state taxes can further reduce your winnings. Lottery tax rates vary widely across the U.S.:

High-Tax States: New York tops the list with a 10.9% tax rate. Winning there would mean paying an additional $35 million in state taxes on a lump sum.
Tax-Free States: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming do not tax lottery winnings, allowing winners to keep more of their prize.

If you purchase a winning ticket out of state, you may owe taxes in both the state where you bought the ticket and your home state. However, most states offer a credit to avoid double taxation.
Expert Advice for Winners

Tax professionals recommend consulting an expert immediately after a big win. They can help you navigate complex state tax laws and determine the most advantageous payout option based on your financial goals.

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