Winning $1.6B Mega Millions and $620M Powerball Jackpots? Here’s How Much You’ll Pay in Taxes

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Perhaps, we all have dreamt about winning a huge sum that can change our life forever.

Despite the fact, your chance of winning is pretty dismal – only 1 in 302.6 million – still here’s how much you’ll pay in case of winning.

Keep on reading Nexter.org to know more.

jackpot-lottery-taxes-pics2

Source: CNBC LLC

And the winner is…IRS!

You may spend your whole life trying to win but the IRS wins anyway. With the Mega Millions jackpot at $1.6 billion and Powerball’s top prize at $620 million, that tax bill will be hefty even if the winner employs strategies to reduce their taxable income.

“If you have a win of, say, $100,000, it’s easier to minimize the tax burden,” said Cari Weston, director of tax practice and ethics for the American Institute of CPAs. “But when it’s this kind of win, it’s going to be harder.”

For winners of $5,000 or more, all states automatically deduct 24 percent in federal , but state vary widely.

Thus there are states, including California, that don’t withhold from lottery winnings, and some like Texas don’t have individual income at all.

For the others, the state takes a bite, especially in New York, where a winner would need to pay a state tax of 8.8 percent. Residents of New York City would pay an additional tax of 3.9 percent. In general, eat up nearly half of winnings.

Source: Getty Images

Potential tax bite

Melissa Labant, a tax policy expert at the American Institute of Certified Public Accountants, said winners should realize that while are initially withheld when prizes are awarded, more money will likely be due at tax time as people suddenly are in up to a 37 percent tax bracket.

The $1.6 billion up for grabs in Mega Millions marks the largest jackpot in lottery history. Your chance of winning it is pretty dismal: 1 in 302.6 million.

For the Powerball jackpot, meanwhile, your chance of winning is 1 in 292 million. The chance of winning both lotteries is at least 1 in 88 quadrillion (that’s 88 followed by 15 zeros).

But in case you are the lucky one who hit all winning numbers in either game, be aware that the taxation of your prize starts before even reaching you.

Source: cnbc

The immediate cash option for Mega Millions is $904 million. The federal withholding would reduce that by $217 million. For the $354.3 million Powerball lump sum, it would mean $85 million getting shaved off the top.

However, that’s just the start of what you’d owe. The top income tax rate for individuals is 37 percent (down from 39.6 percent prior to 2018). That rate applies to adjusted gross income of $500,000 or more.

In other words, hitting either jackpot would mean facing that top rate.


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Winning $1.6B Mega Millions and $620M Powerball Jackpots? Here's How Much You'll Pay in Taxes
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Winning $1.6B Mega Millions and $620M Powerball Jackpots? Here's How Much You'll Pay in
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Perhaps, we all have dreamt about winning a huge sum that can change our life forever. Despite the fact, your chance of winning is pretty dismal - only 1 in 302.6 million - still here's how much you'll pay in case of winning.
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