Winning the Lottery: How Much Do You Actually Get
Winning the lottery is the lottery is the (day)dream of just about everyone. The current MegaMillions jackpot (around $1 billion as of today) has a lot of people doing more than dreaming about it. The odds of a single ticket winning the jackpot are about 302 million to 1. Of course, if you don’t buy a ticket, your odds are zero.
Winning the Lottery: How Much Will You Pay in Taxes?
After winning the lottery, you can claim your prize two different ways. One is receiving an annuity, which means the jackpot is split into yearly payments; usually 30 payments spread out over 29 years. The other is getting a lump sum, which is what most winners opt for. That lump sum is going to be a percentage – not the total – of the jackpot. Usually you’ll get around 60 to 70 percent.
Of course, the tax man is going to grab his own percentage. Let’s look at some scenarios using that $1 billion prize we talked about above.
Taking the Lump Sum
If you do what most folks do, your lump sum will be around $600 million. The government is immediately going withhold 24 percent, or about $144 million. On top of that, you’ll be bumped up into the top bracket, taxing you at 37 percent. So that will be another $78 million in tax on top of the $144 million. That leaves you with $378 million after federal taxes. That’s a lot of money! But it’s not a billion dollars. At least you take consolation in living here in Washington, where we don’t pay state income tax.
Taking the Yearly Payments
The organization running the lottery has an amortization schedule that will pay you different amounts in different years – the payments get bigger as time passes. But let’s figure it on the average, which translates into $34 million a year. The 24-percent withholding will knock off a little over $8 million of that. Being in the highest tax bracket will mean about another $4.5 million in the federal coffers. That leaves you with around $21.5 million a year.
Maybe reading about the tax bill that comes with winning the lottery is a little depressing. But if it makes you feel better, there’s only a 1-in-302,000,000 chance you’ll have to pay it!
When you win, you’ll need trusted advisers. This Forbes article will tell you how to assemble your team.
This calculator will give you a pretty idea of exactly what you’ll win.
Let’s celebrate your win with the Beatles.
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