After weeks without a winner, the Mega Millions jackpot is now $1.35 billion — the second largest in the lottery's 27-year history and the fourth-largest ever in the U.S.
But depending on where you bought your ticket, those winnings can vary by as much as $147 million due to state taxes.
Federal taxes are the same for everyone: 24% upfront on all winnings, although the total tax bill will almost certainly be 37% when you actually file. That's because winning more than $578,125 as a single filer or $693,750 married filing jointly would trigger the top tax rate for 2023.
State taxes are charged, too, but unlike federal taxes, they vary widely by state. They typically range from 3% to 6%, but go up to 10.9% in New York — the most charged by any state participating in the lottery.
However, eight states don't charge taxes at all:
- California
- Florida
- New Hampshire
- South Dakota
- Tennessee
- Texas
- Washington
- Wyoming
If you live in any of these states, you will take home the maximum payout. That means either $446,014,045 as a cash lump sum or a 30-year annuity totaling $851,611,350, according to usamega.com.
The cash payout is much less than the annuity, but it's often chosen since it can be reinvested right away.
The cash payout is $77.1 million more in tax-free states than in New York, the most-taxed state. For the annuity, the difference is just over $147 million.
Where you buy the ticket matters, too: If you buy a winning ticket outside your state or district, you will be subjected to state taxes for the state in which the ticket is purchased. Generally speaking, your home state will require you to report out-of-state winnings, but they will offer a credit or deduction for taxes already paid to a non-resident state.
That means a ticket purchased in Oregon — which has state tax of 8% on jackpot winnings — would be worth about $70 million less than a ticket bought in California, which doesn't charge state taxes on jackpots.
Sign up now: Get smarter about your money and career with our weekly newsletter
Don't miss: Investing experts predict a 'soft-ish landing' for the economy in 2023—here's what that means for your money
