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LOTTERY

Mega Millions: How much will you have left after taxes if you win the $1.25 billion jackpot?

The Mega Millions jackpot has reached a whopping $1.25 billion. Find out how much you would have left over after taxes if you luckily win the grand prize.

El premio mayor de Mega Millions se encuentra en $1,35 mil millones de dólares. Descubre si los inmigrantes indocumentados podrían cobrarlo.
MIKE SEGARREUTERS

The Mega Million lottery jackpot has been rolling over for several months. For this Friday, Aug.4, the jackpot has reached the sum of $1.25 billion, with a cash value of $625.3 million, making it the fourth largest jackpot in the history of this giveaway.

To win the jackpot, it is necessary to match SIX numbers. Participants must choose FIVE numbers from 1 to 70, which correspond to the white balls, and ONE number from 1 to 25, which corresponds to the gold Mega Ball.

The grand prize winner can choose to receive their money in annual payments over 29 years, or in a single cash payment. In the annuity option, the winner would get the total amount of an estimated $1.25 billion. This consists of an immediate payment followed by 29 annual payments that increase by 5% each year.

The winner may also elect to receive a one-time payment estimated at $625.3 million, which is around half the jackpot. Both prizes are pre-tax, so the lucky winner would receive less money after paying the government its share.

READ ALSO: When and where to buy Mega Millions lottery tickets

READ ALSO: Mega Millions jackpot rises to $1.25 billion

What is the best way to collect the $1.25 billion Mega Millions jackpot, annuity or a lump sum?

In the case of choosing the annual payment, the winner must pay taxes every year and not only on a single occasion as in the cash payment. Most jackpot winners choose the one-time cash payment, which in this case is currently $625.3 million before taxes.

Assuming that, like the majority, the winning individual chooses the cash option, a 24% federal withholding tax would reduce the prize to $475.22 million. However, you may have to pay more to the IRS.

Depending on the winner's taxable income, they could face a federal marginal rate of up to 37%, which would further reduce the winnings to about $393.9 million.

If the winner chooses the annual payments option, the first payment would be about $18.8 million, of which about $4.5 million would go to taxes, netting them about $14.3 million after 24% withholding and $11.8 million after facing the federal marginal rate of up to 37%.

In both categories, the winner may owe state taxes, depending on where the ticket was purchased. Although some jurisdictions do not have income taxes or do not tax lottery winnings, others impose a top rate of more than 10%.

Shark Tank investor Mark Cuban has given some advice to lottery winners, urging them to take the annuity so as to be set for life, instead of taking risks with the one-time payment.

Mega Millions is played in 45 states in the United States, excluding Alabama, Alaska, Hawaii, Nevada and Utah. Also, this lottery can be played in the District of Columbia and the Virgin Islands. Mega Millions drawings are held every Tuesday and Friday at 11 pm ET. The cost of the ticket is $2.