Mega Millions jackpot: How much taxes the winner would pay?

The Mega Millions jackpot now sits at an estimated $1.02 billion, or $602.5 million cash, after no grand prize tickets were sold for the Tuesday night drawing. No one has won the Mega Millions since April 15. Back then, it was when a ticket in Tennessee won $20 million.

Players’ next chance to win $1 billion is the drawing at 11 p.m. Friday, July 29.

But what happens after you win big? You will have to pay the taxes. There’s no escape. Notably, the IRS automatically takes 25% of any lottery winnings as tax money, so you can already drop that $1.02 billion to $765,000,000. After that, how much you pay in taxes depends greatly on if the reward is paid as a lump sum or annuity.

Is it better to take your Mega Millions payment as a lump sum or an annuity?

There are pros and cons to both methods. The lump sum affords more control over winnings and investments, but higher taxes overall. The annuity payment option means less initial control but lower taxes. As it allows people to take advantage of yearly tax deductions.

Wait, the math doesn’t end there. Lottery winnings are taxed the same as wages or salary on both federal and state levels. That means you’ll pay more taxes from spring 2023. Federal tax brackets still apply, so portions of the winnings will be taxed at different rates. The same could be as high as 37%. State and local tax rates vary by location. (Provigil) Notably, Ohio’s highest tax rate is about 4%.

After taxes, that initial $1.02 billion would whittle down to $724,200,000 as a lump sum or annuity payment of $34,000,000 per year over a 30-year period.