Debbie Nash from Kenosha, Wisconsin fills out her Mega Millions lottery ticket in this June 29, 2004 file photo.
Cox Media Group National Content Desk
The Mega Millions jackpot is at $540 million after no one match all the numbers in Tuesday’s drawing.
Many are dreaming of that big payday – the one where you wave adios to the job and drive down the freeway throwing $20s out the car window.
Not to be a buzz killer, but if dream becomes reality, you may want to roll the window back up and put your wallet back in your pants.
When it comes to winning a jackpot, there are more hands in the pot than those who belong to all the long-lost relatives you suddenly have. The greediest one, expect, perhaps for that one aunt who is never satisfied, belongs to an uncle. Uncle Sam.
Just to get this out of the way, $540 million is an enormous amount of money. If you were to win that amount in Friday’s Mega Millions drawing, then take the lump sum option, your winnings would be $380 million – another enormous amount of money.
However, once you claim your prize, that’s where the rubber meets the road when it comes to how much you get to keep.
Here’s what would happen if you take the $380 million lump sum option.
First, the federal government takes 25 percent off the top – in fact, you never even get to see it because they take it out before you are given the check. In this case, you may want to sit down for this part, the 25 percent comes out to $95 million.
That will leave you with $285,000,000 – again, an enormous amount of money.
Unfortunately, the taxes don’t stop there. Of the $285 million, you will still owe more federal taxes for the year you won the jackpot, (the government takes the 25 percent as part of the tax bill you owe for that year), and the rate at which you will be taxed is the highest one the government charges – 39.6 percent. That rate is charged on income above $413,201.
The tax owed on $285 million, taxed at 39.6 percent, is nearly $113 million – $112,816,369.05 to be exact.
If you have breathed a sigh of relief thinking you’re taxes are paid, you’ve forgotten on thing – that’s only the federal tax. Unless you live in California, Delaware, Florida, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington or Wyoming, you’ll also owe state taxes. Those 10 states do not tax lottery winnings.
Here’s what you will pay (in millions) according to the state where you live. This information comes from USA Mega.com, a site that tracks all things lottery. The amounts listed below would be subtracted from the $285 million lump sum. For instance, $285 million minus the amount Arizona taxes ($19 million) leaves you with roughly $266 million.