The mega jackpot of $ 510 million: Here’s the tax
Mega Millions award went up to $ 510 million This week, after no winner was announced during Tuesday’s drawing.
The mega prize is the eighth time the jackpot has exceeded $ 500 million.
The game officials also noted that three of the biggest Mega Millions prizes were won in January.
However, after the IRS collects a large chunk of the winnings, the award will be significantly smaller.
“ Strain the jackpot ” cut lottery ticket sales and cut prize money
The winning ticket owner faces two options: either take the money in the form of a lump sum or an annual payment, which will be paid out over a period of about 30 years.
Under the cash option, which is the most popular option, the jackpot is subject to the federal discount, which is 24% immediately before the winner receives a cent. So in this case, the total amount of winnings would be estimated at $ 377.4 million before taxes.
This would reduce the award value by $ 90.5 million.
The IRS will also likely charge earnings in the highest federal income bracket, which is 37% for people with incomes over $ 500,000. The winner will be indebted for any remaining difference between this tax rate of 37% and the federal withholding rate of 24% when the winner submits tax returns at the end of the year, which will deduct another $ 49 million.
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This means about $ 139.5 million will be deducted from federal taxes and the total grand prize value of roughly $ 238 million.
Depending on where the winner lives, the grand prize can also be subject to state taxes at rates ranging from 8.82%.
Gains are not subject to the 3.8% net investment income tax.
If the winner plans to donate money, they are allowed to donate up to $ 15,000 to as many people as they wish without tax consequences.
The next draw will be held on Friday.
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