The Mega Millions jackpot has climbed to $1.15 billion ahead of Friday's drawing, making it the fifth-largest prize in the game's history.
But how much you would actually take home could be less than half that, depending both on your choice of payout and how much you would owe in federal and state taxes.
Everyone owes federal taxes on lottery winnings. While an automatic 24% is withheld upfront, you would almost certainly owe a total of 37% when filing your 2024 tax return, as winning a billion dollars would put you in the top tax bracket.
State taxes on lottery winnings in the U.S. generally range from 3% to 6%, with New York imposing the highest rate at 10.9%. However, eight states don't tax lottery winnings at all:
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- California
- Florida
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If you live in any of these states, you will take home the maximum payout. That works out to $325,184,812 as a cash lump sum, or a 30-year annuity totaling $725,754,360, according to usamega.com.
While the cash payout is much less than the annuity, winners usually take the lump sum since they get more money right away.
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Compared with the taxes you might pay in the state of New York, that's a difference of $125,349,990 for the annuity and $56,254,900 for the cash lump sum.
Where you buy the ticket also matters, as a winning ticket purchased out of state could be subject to that state's taxes. In most cases, your home state will require you to report out-of-state winnings but will usually offer you a credit or deduction for taxes paid to the other state.
State lottery tax laws vary, so if you win a lottery prize in a state other than your own, consult a tax professional. They can also help you determine the best payout option based on your financial goals.
The next Mega Millions drawing is Friday, December 27, 2024, at 11 p.m. ET.
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