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Lotto fever: Combined Powerball, Mega Millions prizes surpass $1 billion

  • The combined Powerball, Mega Millions jackpots now surpass $1 billion.
  • New tax rules for 2018 will apply to the winning tickets.

The combined Powerball, Mega Millions jackpots now surpass $1 billion.

The Powerball jackpot is $570 million, and the Mega Millions stands at $450 million. Both games had their most recent jackpot wins in late October.

The next Mega Millions drawing is scheduled for 11 p.m. ET on Friday, and the next Powerball drawing is Saturday at 10:59 p.m. ET.

This is the first time U.S. lottery players have had two opportunities to try for prizes exceeding $400 million, and the second time both have simultaneously topped $300 million.

"The rule of thumb is that you walk away with about a third." -Susan Bradley, Sudden Money Institute

The jackpots are also individually hitting record-setting amounts: At $450 million, the Mega Millions would be the game's fourth largest, while the $570 million Powerball would be that game's fifth largest. The Powerball would also be the seventh largest jackpot in U.S. lottery history.

The first time both games simultaneously had jackpots topping $300 million was in early August. The Mega Millions was the first to pay out, with Patricia Busking of Illinois taking home $393 million in mid-August.

The Powerball climbed to $758.7 million before Mavis Wanczyk of Massachusetts won in late August. That jackpot was the second largest in the game's history and the second biggest in U.S. lottery history. It was also the largest prize ever awarded to a single ticket.

Even if you are lucky enough to win, you won't walk away with the full amount. Lottery site USAMega.com estimates the federal tax withholding on the $281.2 million Mega Millions lump sum would be $70.3 million, and state taxes could knock out up to another $24.8 million (with New York the worst offender). For the Powerball, those tax tallies for the $358.5 million cash prize would be $89.6 million and up to $31.6 million, respectively.

How investors would handle a multi-million-dollar lottery win

Take the lump sum 74.8% Take the annuity 25.2%
Claim the ticket immediately 43.4% Wait to come forward 56.6%
Consult a lawyer/accountant/financial advisor before claiming 80.1% Claim the ticket with no outside help 19.9%
Remain anonymous 90.7% Step into the spotlight 9.3%
Quit my job immediately 48.1% Keep working 51.9%
Hire a financial advisor 63.6% Manage it myself 36.2%
SOURCE: TD Ameritrade

That's just what's withheld before you're awarded that giant check. You'll owe the rest of the bill come tax time. (See infographic below.)

Winners face a different tax scenario than last year. Under the new tax law's brackets, a winner with that kind of nine-figure income in 2018 would end up in the top bracket at a rate of 37 percent. (In 2017, the top rate was a slightly steeper 39.6 percent.)

But state and local income taxes paid are now capped at $10,000 as an itemized deduction. The loss of that deduction whittles a few million more off your take-home. (The luckiest winners will still be in those states that participate in that multistate lottery but do not have an income tax, or specifically do not tax lottery prizes.)

The death tax is so un-American, it turns my stomach: 'Shark Tank's' Kevin O'Leary

Of course, there are many other elements of an individual's situation that can sway the final tax bill.

"The rule of thumb is that you walk away with about a third of [the jackpot]," Susan Bradley, a certified financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida, told CNBC in late 2017.

Winners may also benefit from the tax law's changes to estate taxes. The legislation doubles the estate tax exemption from $5.49 million per individual to almost $11 million.

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