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No, you did not hit the Mega Millions $ 520 million jackpot.
The lottery jackpot went up to an incredible $ 600 million in Tuesday night’s draw after no single ticket matched the six numbers drawn on Friday night. The amount marks the eighth largest prize in the history of the lottery. And the Powerball jackpot, in turn, is estimated at $ 470 million for Saturday night’s draw.
Of course, the announced amounts are not what the winners would receive. Lottery employees are required to withhold 24% of large federal tax earnings. And that is just the beginning of what you would pay Uncle Sam and, usually, the state coffers.
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For the Mega Millions $ 600 million jackpot, the cash option – which most winners choose instead of an annuity – is $ 442.4 million. The 24% retention would reduce approximately $ 106.2 million before the prize reaches you.
However, you can count on a larger debt to the IRS.
The highest marginal income tax rate is 37%. If there were no reductions 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 tax (which would be April 2022 for the jackpots claimed in 2021 ).
That would be $ 163.7 million, in all, going to the IRS.
State taxes would be beyond that. Depending on where you live, this can be over 8%.
Meanwhile, for the Powerball $ 470 million jackpot, the cash option is $ 362.7 million. If there is a winner, the 24% federal withholding would reduce $ 87 million from the top. Another 13% would be $ 47.2 million, for a total of $ 134.2 million for the tax authorities.
Despite delivering a sizeable amount to federal and state coffers, the value after tax would change lives. Experts say jackpot winners must bring together a team of experienced professionals – including a lawyer, tax advisor and financial advisor – to help navigate their sudden fortune.
Most players will not have to worry about that, however. The chance of hitting the Mega Millions jackpot with a single ticket is minuscule: 1 in 302 million. For Powerball, the odds are a little better: 1 in 292 million.