Tonight’s Mega Millions Jackpot Won’t Make You as Rich as You Think
Life + Money

Tonight’s Mega Millions Jackpot Won’t Make You as Rich as You Think

Flickr/Mark Ou

Lottery ticket buyers may not be the only ones feeling lucky about tonight’s half-billion Mega Millions Jackpot.

The federal government and the home state of the winner also stand to receive a significant windfall from the payout, thanks to the taxes they collect from the winner.

The current jackpot is worth $540 million, making it the seventh-largest U.S. jackpot of all time and the biggest this year since the world-record $1.6 billion Powerball in January. It’s been growing since March, the last time someone won a Mega Millions jackpot, but sales have accelerated amid increased media coverage.

Related: Mega Millions Jackpot Hits $540 Million: The Numbers You Should Know

“Sales are expected to grow stronger right up until Friday’s night’s drawing,” Paula Otto, executive director of the Virginia Lottery and Lead Director for the Mega Millions Group said in a statement.

But all that cash won’t go to your pocket if you have the winning numbers at tonight’s drawing at 11 p.m.

If you choose the lump-sum payment of $380 million, you will owe an immediate federal tax bill of $95 million, or 25 percent of the total. That leaves you with a cool $285 million—before state taxes.

If you take the 30-year annuity payout option, you will pay the federal government $4.5 million each year on your $18 million annual payment. That means you get to pocket $13.5 million per year, again before state taxes. (Non-U.S. residents face a higher withholding rate of 30 percent from the federal government.)

Related: Here’s How States Profit from Powerball Madness

Count yourself richer if you live in California, Delaware, Florida, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington or Wyoming. These 10 states of the 44 that participate in the Mega Millions don’t charge sales tax on winnings, according to USAMega.com.

Washington, D.C.—which also participates—charges an 8.5-percent tax, while the tax rate in the U.S. Virgin Islands—also a Mega Millions participant—is unknown.

The tax rate varies in the remaining 34 states, with residents of New York facing the highest tax bill of 8.82 percent. That means the Empire State gets $33.5 million from a lump-sum payment, leaving the winner with a mere $251.5 million—or just over a quarter-billion dollars.

If a New York winner chooses annual payments, the state tax bill totals $1.6 million a year, with $11.9 million left over each year. It gets worse if the winner lives in New York City, which imposes an additional 3.876-percent tax.

Related: Here’s How Your State Spends Its Powerball Profits

Out-of-state winners with tickets purchased in Maryland or Arizona face a non-resident tax, plus potential taxes from their home states, according to The Tax Foundation.

Of course, these taxes are just the amount that’s withheld at the time of payment. You also will also owe regular income taxes (at the top federal bracket of 39.6 percent) state income taxes at tax time. Good thing you’ll be able to afford a decent accountant. 

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