The MegaMillions Jackpot Is $367 Million, But What Are The Taxes?
While you might be dreaming of winning the prize, you should know the IRS will come for a sizable chunk of the winnings.
At this writing, the MegaMillions lottery jackpot is a very healthy and enticing $367 million, and when jackpots grow to this size, there's a considerable amount of interest from the general public in winning that dough.
While that would be great, what wouldn't be much fun is fielding the hundreds or thousands of calls from those who would like you to share your windfall with them.
However, even if friends and family decided to leave you alone to enjoy your pile of cash--The Internal Revenue Service most certainly won't.
Tonight's 9:45pm drawing marks the largest MegaMillions jackpot ever offered during the month of May.
If you end up being the holder of the winning ticket, you're looking at a couple of options: either take the money in the form of a lump sum or an annuity payment (which would be paid out over the course of about 30 years).
In the case of the annuity payment, which is the less common choice, a winner would receive one immediate payment and 29 consecutive ones. If you chose the lump sum option, it would be valued at $228 million. About $54.7 million will be immediately withheld in federal taxes, bringing the amount down to around $173.3 million.
The IRS will also likely tax the winnings at the highest federal income bracket, which now sits at 37 percent for individuals with incomes in excess of $500,000. You would owe any difference left over between that tax rate (37 percent) and the federal withholding rate (24 percent) when you file your tax return at the end of the year – or 13 percent. In this case that shaves off another $29.6 million.
Depending on where the winner lives, the jackpot could also be subject to state taxes, with amounts that range from 0 to 8.82 percent.
Prior to the implementation of state taxes, the lump sum jackpot would be worth $143.7 million.
Winnings are not subject to the 3.8 percent net investment income tax.
If the winner plans on giving money away, under current law he or she is allowed to give up to $15,000 to as many people as desired without tax consequences.