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There is officially one winner for the $1.128 billion Mega Millions jackpot — and the taxman will take a sizable share, experts say.
A single ticket sold in New Jersey won the game’s fifth-largest grand prize after matching all six numbers drawn Tuesday night, Mega Millions announced Wednesday. The final jackpot dropped from an estimated $1.13 billion to $1.128 billion based on actual ticket sales.
The lucky winner will choose between two options: an annuitized prize worth $1.128 billion or a lump-sum payout of $536.6 million cash.
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Regardless of the payout option, “you’re losing almost half of it” to taxes, said Albert Campo, a certified public accountant and president of AJC Accounting Services in Manalapan, New Jersey.
New Jersey taxes prizes over $10,000 and the winner will owe millions to the state, including a mandatory withholding, on top of their federal tax bill, he said.
Eight states, including California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, do not levy income taxes on lottery winnings.
How much the winner could owe in taxes
Before seeing a penny of the jackpot, the winner will pay a 24% mandatory upfront federal withholding to the IRS.
If they choose the $536.6 million cash option, the 24% withholding automatically reduces the prize by about $129 million.
However, the jackpot pushes the winner into the top federal tax bracket, which is 37% for 2024, Campo said. After the 24% withholding, the winner could still owe another 13% in federal taxes, or about $70 million.
Of course, these are rough calculations. The winner’s federal tax bill will also depend on other income, credits or deductions.
As for state taxes, New Jersey automatically withholds 8% for payouts of more than $500,000, which will cost the winner about another $43 million up front. The state withholding covers “a big chunk,” but New Jersey’s top tax bracket is 10.75%, Campo said.
“None of these winners really think about taxes” until there’s a hefty share going to the IRS and state government, said Andrew Stoltmann, a Chicago-based lawyer who has represented several lottery winners.
The Mega Millions is not the only way to win big. The Powerball jackpot has reached an estimated $865 million without a big winner from Monday night’s drawing. The chances of scoring the grand prize for that game are roughly 1 in 292 million.