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Whether you choose to treat your winnings as a lump sum or as a 30-year annuity, the IRS will save 24% of your earnings even before they reach you.
For the $ 470 million Mega Millions jackpot, the immediate payout option is $ 265 million. For the $ 253 million Powerball jackpot, there is $ 148.4 million.
The 24% federal withholding tax would reduce the Mega Millions cash option by approximately $ 63.6 million, to $ 201.4 million, and that of Powerball, from 35, $ 6 million, to $ 112.8 million. You should also expect to owe more to Uncle Sam at tax time.
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In addition to the deduction of the IRS, you will pay taxes on this money unless you live in a state where lottery winnings are untaxed. According to the USAMega.com lottery website, the rate ranges from a high of 8.82% in New York to a low of 2.9% in North Dakota.
If you suddenly become one of the 1%, reducing your tax burden will likely become one of your financial priorities. Make sure that when you call in experts, your team has a tax advisor and a financial planner, as well as an experienced lawyer in assisting lottery winners (this should be your first call) .
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