If daydreaming about scoring a windfall would help you escape the coronavirus doldrums, you might want to buy a Mega Millions ticket.
The lottery game's jackpot has reached the $200 million mark for the first time in almost three months amid slowing sales. And if all six numbers are matched in Friday night's drawing, it could be a while before the jackpot gets this high again.
In response to reduced ticket purchases during the coronavirus pandemic, Mega Millions officials announced in early April that future games' starting jackpots — as well as jackpot increases when there's no winner in a drawing — would be based on game sales and interest rates with no fixed minimum amount. (A similar action was taken by Powerball officials.)
Previously, each new Mega Millions jackpot started at $40 million and grew by a minimum of $5 million. Those factors, officials said, will be determined before each game and shared publicly.
Of course, your chance of hitting the jackpot with a single ticket is miniscule: 1 in 302 million. And, the advertised amount isn't what the winner ends up with, thanks to federal and state taxes.
For this $200 million jackpot, the cash option — which most winners choose — is $161.8 million.
The federal 24% tax withholding would reduce that amount by $38.8 million, to $123 million. However, the current top marginal rate of 37% would mean owing a lot more to the IRS at tax time.
Assuming you had no reductions to your taxable income — such as large charitable contributions — another 13%, or $21 million, would be due to the IRS at tax time (which would be April 2021 for jackpots claimed in 2020).
That would be $59.8 million in all going to Uncle Sam, leaving you with a cool $102 million.
However, state or local taxes would be on top of that. Those levies range from zero to more than 8%, depending on where the ticket was purchased and where the winner lives. In other words, you could end up paying more than 45% in taxes.
Nevertheless, you'd still be left with what's likely a life-changing amount of money — not a shabby return for a $2 ticket.