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Eyeballing that Mega Millions jackpot? Good ol’ Uncle Sam is, too.
After more than two months of twice-weekly drawings with no one matching all six numbers, the top prize has climbed to $367 million for Tuesday night’s drawing. The last jackpot won was on March 12, for $50 million.
Of course, the advertised amount isn’t what winners end up with.
Whether they take the prize as an annuity spread out over three decades or as an immediate, reduced lump sum, 24% is withheld for federal taxes. However, the top marginal tax rate of 37% means owing a lot more to the IRS at tax time. State taxes typically are due, as well.
Largest U.S. lottery jackpots
| Rank | Amount | Date won | Game | Winner locations |
|---|---|---|---|---|
| 1 | $1.586 billion | Jan. 13 2016 | Powerball | CA-FL-TN |
| 2 | $1.54 billion | Oct. 23 2018 | Mega Millions | SC |
| 3 | $768.4 million | March 27 2019 | Powerball | WI |
| 3 | $758.7 million | Aug. 23 2017 | Powerball | MA |
| 5 | $687.8 million | Oct. 27 2018 | Powerball | IA-NY |
| 6 | $656 million | Mar. 30 2012 | Mega Millions | KS-IL-MD |
| 7 | $648 million | Dec. 17 2013 | Mega Millions | CA-GA |
| 8 | $590.5 million | May 13 2013 | Powerball | FL |
| 9 | $587.5 million | Nov. 28 2012 | Powerball | AZ-MO |
| 10 | $564.1 million | Feb. 11 2015 | Powerball | NC-PR-TX |
“If you win, just realize how big the tax bill can be and make sure you’re ready to handle it,” said certified financial planner Dan Routh, a wealth advisor at Exencial Wealth Advisors in Oklahoma City.
For Tuesday night’s Mega Millions drawing, the cash option — which most winners go with — is $228 million. The 24% federal withholding would reduce that amount by $54.7 million.
Assuming you had no reduction to your taxable income — such as large charitable contributions — another 13%, or $29.6 million, would be due to the IRS. That would be $84.3 million in all going to Uncle Sam.
This means that after federal taxes, you’d be left with $143.7 million.
Then there are state taxes, which range from zero to more than 8% depending on where the ticket was purchased and where the winner lives.
In other words, you could end up paying more than 45% in taxes.
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If you’re lucky enough to win a life-changing amount in the lottery — and your chance of winning the Mega Millions jackpot is 1 in about 302.1 million — experts recommend turning to a team of professionals who are experienced in handling large windfalls. That should include an attorney, a financial advisor and a tax advisor.
“Everyone who buys a ticket dreams of winning the huge jackpot, but nobody actually thinks they will win, or has a plan in place if they do,” said Jason Kurland, a partner at Rivkin Radler, a law firm in Uniondale, New York.
Meanwhile, the Powerball jackpot is an estimated $288 million for Wednesday night’s drawing.
The last time there was a top-prize winner in that game was on March 28, when a Wisconsin man nabbed a $768.4 million jackpot. Manual Franco, who claimed his haul in late April, chose the lump sum cash option of $477 million. After federal and state tax withholdings, he received $326 million.