Mega Millions: How much will you have left after taxes if you win the $1.1 billion jackpot?

While the Mega Millions jackpot has surpassed $1 billion, the lucky winner (if one is selected) will not see close to that amount enter their bank accounts.

When claiming your winnings, you have two options: cash or annuity. The cash option gives you a lump sum upfront, but the total is lower than what you would receive if you chose the annuity payments distributed over thirty years.

First, let’s take a look at how taxation affects the cash prize winnings option. For this Tuesday’s $1.1 million Mega Millions jackpot, the cash prize would be $525.8 million. While around half of what is being advertised, the figure is still gargantuan.

Right off the bat, one must consider that the federal government taxes lottery winnings at 24 percent, knocking the cash prize down to a mere (wink wink) $399,608,000. Then, because lottery winnings are counted as income, an additional 37 percent tax will be levied against the sum, dropping it to $251,753,040.

If one were to pick the annuity option, they would receive the total jackpot over thirty years, with an average payment of around $36,666,667 distributed annually. Each payment would be taxed at 24 percent and later at 37 percent when the lucky winner’s taxes were filed, leaving them with an annual payment of $17,556,000.

How do states tax Mega Millions lottery winnings?

The Mega Millions lottery winnings may be subject to additional state taxes in some states where the game is played. However, residents of California, Delaware, Florida, South Dakota, Tennessee, Texas, Washington, and Wyoming do not have to pay state taxes on their lottery winnings. If you do not live in one of these states, you would need to factor in the state tax rate when calculating your winnings. For example, if you live in Maine, you would multiply the cash and annuity amounts by 5 percent, resulting in $12,587,652 and $877,800, respectively. After subtracting the federal and state taxes from the winnings, the remaining amounts would be $239,165,388 for the cash option and $16,678,200 for the annuity option.

The states with the highest tax rates on lottery winnings are New York (8.82 percent), Maryland (8.75 percent), New Jersey (8 percent), Oregon (8 percent), Wisconsin (7.65 percent), Minnesota (7.25 percent), Arkansas (7 percent), South Carolina (7 percent), Connecticut (6.99 percent), and Idaho (6.93 percent).