Mega Millions players may be daydreaming about what they'd do with an extra $785 million, the game's current jackpot amount.
One way they should count on using it if they win? Sharing a slice with the IRS.
After no tickets matched all six numbers drawn Friday night, the jackpot climbed again, marking the fourth time in the game's history that the top prize has gone above $700 million, according to Mega Millions officials. In the previous three instances, those jackpots ended up being worth more than $1 billion when they were won.
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The jackpot has been rolling higher through twice-weekly drawings since mid-October with no winner. If someone nabs it in the next drawing — set for Tuesday night — this $785 million prize would rank as the sixth-largest lottery prize ever won and the fourth-largest Mega Millions prize
Of course, the advertised amount is only what you'd get if you were to choose to take your winnings as an annuity spread over three decades. The lump-sum cash option — which most winners choose — for this jackpot is $403.8 million, as of midday Tuesday.
Regardless of how you'd decide to receive your windfall, taxes would take a bite out of it.
$96.9 million in taxes would be shaved off cash option
Assuming you're like most winners and were to choose the cash option, a mandatory 24% federal tax withholding would reduce the $403.8 million by $96.9 million. That would cut your take to $306.9 million.
However, you could expect to owe more to the IRS at tax time. The top federal income tax rate is 37% and applies to income above $578,125 for individual tax filers and $693,750 for married couples who file a joint tax return.
This means that unless you were able to reduce your taxable income by, say, making large tax-deductible charitable contributions, you would owe another 13% — or about $52.5 million — at tax time. That would bring your winnings down to $254.4 million.
There also could be state or local taxes depending on where the ticket was purchased and where you live. Those levies range from zero to more than 10%.
Most Mega Millions players, though, won't have to worry about paying millions of dollars to the IRS or state coffers: The odds of a single ticket matching all six numbers to land the jackpot is about 1 in 302.6 million.
Meanwhile, the Powerball jackpot is $291 million (with a cash option of $147.9 million) for Wednesday night's drawing. The chance of hitting the motherlode in that game is slightly better: 1 in 292 million.