The grand prize winner of seven lottery games, Richard Lustig, gives tips on how to win the Mega Million and Powerball jackpots.
The Mega Millions jackpot rose to $ 510 million this week, after no winner was declared during Tuesday’s draw.
The huge prize represents only the eighth time that the jackpot has exceeded $ 500 million.
Game officials also noted that three of the biggest Mega Millions prizes were won in January.
However, after the IRS takes its share of the winnings, the premium will be noticeably less.
‘JACKPOT FATIGUE’ CUTTING LOTTERY TICKET SALES, REDUCING PRIZE VALUES
A person with a winning ticket is faced with two options: receiving the money in the form of a single amount or an annuity, which would be paid over about 30 years.
In the cash option, which is the most common choice, the jackpot is subject to federal withholding, which is 24% immediately before the winner receives a penny. Therefore, in this case, the total amount of earnings would be valued at $ 377.4 million before tax.
This would reduce the value of the prize by around $ 90.5 million.
The IRS would also likely tax earnings in the highest federal income bracket, which is 37% for people with an income in excess of $ 500,000. The winner would have the difference between the 37% rate and the 24% federal withholding tax when the winner submits his income tax return at the end of the year, which would result in a deduction of another US $ 49 million.
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This means that about $ 139.5 million would be deducted from federal taxes and the total jackpot would be worth around $ 238 million.
Depending on where the winner lives, the jackpot may also be subject to state taxes with rates ranging up to 8.82%.
Gains are not subject to a 3.8% net investment income tax.
If the winner plans to donate money, he can donate up to $ 15,000 to as many people as he wants, without tax consequences.
The next draw will be on Friday.