Someone nabbed the $410 million Mega Millions jackpot. Now, here's that tax bill
- For this jackpot, the cash option — which most winners go with — is $316.8 million.
- The required federal tax withholding of 24% will reduce that by $76 million, and state taxes will shave off another $15.2 million.
- Additional taxes will likely be due to Uncle Sam at tax time.
Someone in Arizona is hitting Hump Day a whole lot richer.
A single Mega Millions ticket sold in the Grand Canyon State matched all six numbers in Tuesday night's drawing to nab the $410 million jackpot. While the windfall will be a life-changing bonanza, the advertised amount isn't what the winner will actually end up with.
Whether the jackpot is claimed as an annuity or lump sum, federal and state taxes will be withheld, and more will likely be due at tax time.
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For this jackpot, the cash option — the choice most winners go with — is $316.8 million. The required 24% federal tax withholding would reduce that amount by $76 million.
Then there are state taxes. In Arizona, the withholding rate is 4.8%, which would mean another $15.2 million getting shaved off the top.
In other words, that $316.8 million cash option would be reduced by $91.2 million, leaving the winner with $225.6 million headed for their bank account.
However, additional taxes could be due to Uncle Sam.
The top marginal income tax rate at the federal level is 37%. If there are no reductions to the winner's taxable income — such as large charitable contributions — another 13%, or $41.2 million, would be due to the IRS at tax time (which would be April 2021 for jackpots claimed in 2020).
That would be $117.2 million, in all, going to the IRS.
The jackpot has reset to $20 million — a lower-than-normal amount.
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.)
The chance of hitting the Mega Millions jackpot with a single ticket is miniscule: 1 in 302 million. For Powerball — which is at $22 million for Wednesday night's drawing — the odds of winning the top prize are slightly better: 1 in 292 million.