Illinois’ $900M Mega Millions Jackpot: How Much Do You Keep?

Another rollover, another big money jackpot up for grabs.

When the Mega Millions drawing takes place tonight, there'll be around $900 million sitting there waiting to be taken by a lucky player or players, so what happens if everything works out perfectly and you're the big winner?

First decision: do you take the lump sum or the annuity option (30 years of payments)? For simplicity here, and because most people go this way, we’ll assume you'll go with a lump-sum option (which is smaller than the full advertised jackpot amount).

Let’s work off of the $900 million figure to illustrate what taxes you’d owe and what you might keep if you become Illinois' newest multi-millionaire.

Let's Get Started Figuring Out Your Illinois Tax Bill

When it comes to Federal taxes, The IRS treats lottery winnings as ordinary income and applies withholding and then additional tax liability when you file. By law, 24 % is generally withheld immediately for large lottery winnings.

But since a $900 million prize would push you into the highest federal tax bracket, you’d likely owe up to 37 percent of the taxable amount. So, that would be approximately $333 million in federal tax owed. Up front, you’d see $900 million minus the 24 percent withholding ($216 million) leaving you with $684 million in hand initially, but you’ll owe more at tax-time.

You would then owe the state of Illinois some tax money. Illinois imposes a tax on lottery/gambling winnings of 4.95 percent. So, $900 million × 4.95 percent equals $44.55 million owed to Illinois.

Let's Bottom-Line Things For You

Starting from $900 million, subtract $333 million (federal) and $44.55 million (state) and you’re left with about $522.45 million. That’s the rough “after-tax” amount an Illinois winner might expect under the lump-sum scenario (again, actual payout would likely be less than $900 million after lump-sum conversion and other factors, so this is a best-case-type estimate).

Why the actual amount may differ:

• The advertised jackpot is usually the annuity value; the actual lump sum payout is lower.
• Tax withholding (24 %) is just the start; the rest must be reconciled on your tax return.
• There could be additional tax issues (estate tax, state trust planning, etc.).