How much tax would be owed on Mega Millions’ $1 billion ticket?

The Mega Millions jackpot now sits at an estimated $1.02 billion, or $602.5 million cash, after no grand prize tickets were sold for the Tuesday night drawing.

No one has won the Mega Millions since April 15, when a ticket in Tennessee won $20 million. Players’ next chance to win $1 billion is the drawing at 11 p.m. Friday, July 29.

Mega Millions: Mega Millions results July 26, 2022: Jackpot crosses $1 billion; Ohio ticket wins millions

But what happens after you win big? One of life’s few certainties: paying taxes.

The IRS automatically takes 25% of any lottery winnings as tax money, so you can already drop that $1.02 billion to $765,000,000. After that, how much you pay in taxes depends greatly on if the reward is paid as a lump sum or annuity.

The sign on the counter at Troy Road Market shows the new jackpot Mega Millions of 1.02 billion on Wednesday, July 27, 2022. TOM E. PUSKAR/ASHLAND TIMES-GAZETTE

Is it better to take your Mega Millions payment as a lump sum or an annuity?

There are benefits and downsides to both methods. The lump sum affords more control over winnings and investments, but higher taxes overall. The annuity payment option means less initial control but lower taxes because it allows people to take advantage of yearly tax deductions. This decision is why some winners seek out a financial advisor after hitting the jackpot.

The math doesn’t end there. Lottery winnings are taxed the same as wages or salary on both federal and state levels, so you’ll pay more taxes come spring 2023.

Federal tax brackets still apply, so portions of the winnings will be taxed at different rates and could be as high as 37%. State and local tax rates vary by location, but Ohio’s highest tax rate is about 4%.

More on Mega Millions: From blimps to Galley Boys for life: What can you buy with $1 billion Mega Millions jackpot?

After taxes, that initial $1.02 billion would whittle down to $724,200,000 as a lump sum or annuity payments of $34,000,000 per year over a 30-year period, according to TaxAct’s lottery tax calculator.

That leaves the next important question: What would you buy with that money?  The Beacon Journal wants to know, email reporter Tawney Beans at [email protected] with your million-dollar wish list.

This article originally appeared on Akron Beacon Journal: Big win means a big tax on Mega Millions’ $1 billion ticket

Source link