Another rollover, another big money jackpot up for grabs.
When the Mega Millions drawing takes place tonight, there'll be around $900 million sitting there waiting to be taken by a lucky player or players, so what happens if everything works out perfectly and you're the big winner?
First decision: do you take the lump sum or the annuity option (30 years of payments)? For simplicity here, and because most people go this way, we’ll assume you'll go with a lump-sum option (which is smaller than the full advertised jackpot amount).
Let’s work off of the $900 million figure to illustrate what taxes you’d owe and what you might keep if you become Illinois' newest multi-millionaire.
When it comes to Federal taxes, The IRS treats lottery winnings as ordinary income and applies withholding and then additional tax liability when you file. By law, 24 % is generally withheld immediately for large lottery winnings.
But since a $900 million prize would push you into the highest federal tax bracket, you’d likely owe up to 37 percent of the taxable amount. So, that would be approximately $333 million in federal tax owed. Up front, you’d see $900 million minus the 24 percent withholding ($216 million) leaving you with $684 million in hand initially, but you’ll owe more at tax-time.
You would then owe the state of Illinois some tax money. Illinois imposes a tax on lottery/gambling winnings of 4.95 percent. So, $900 million × 4.95 percent equals $44.55 million owed to Illinois.
Starting from $900 million, subtract $333 million (federal) and $44.55 million (state) and you’re left with about $522.45 million. That’s the rough “after-tax” amount an Illinois winner might expect under the lump-sum scenario (again, actual payout would likely be less than $900 million after lump-sum conversion and other factors, so this is a best-case-type estimate).
Why the actual amount may differ:
Gallery Credit: Stacker