If you are holding the winning ticket for the $432 million Mega Millions jackpot, brace yourself because you are about to learn how huge your tax bill is.
On Tuesday night’s draw, a single Mega Millions ticket sold in New York City matched all six numbers winning the top prize. But the advertised amount, which is $432 million, is not really the amount the winner will take home.
Winners are given two options: they can take their prize as a lump sum, or an annuity paid over 30 years. For the $432 million Mega Millions jackpot, the cash option which most people choose, is about $315 million, CNBC reported.
Before it even reaches the hands of the winner, 24% or $75.6 million will be withdrawn for federal taxes. But this would possibly increase at tax time (April 2022 for 2021 wins) because of the current top marginal income tax rate of 37%.
And there’s more. The state and local taxes. In New York state, the prize is subjected to a 10.9% rate or $34 million. An additional 3.87% or $12.2 million will go to New York city’s own coffers. Less all those taxes, the winner is left with about $192.9 million, still without any extra amount due at tax time.
Even with the huge share that goes to taxes, the money is more than most people have seen in a lifetime. This will mean that essentially, you need to get professional guidance before heading to the lottery headquarters. In New York, you can claim your prize within a year.
According to experts, upon winning the lottery, the first person you should call should be an attorney who has experienced in assisting lottery winners. Professionals like tax and financial advisors should also be helping you.
New York does not allow full anonymity when winning big lottery prizes but the winner may be able to set up a trust or limited liability company to claim the prize and still keeping their identity anonymous.
Experts also said that winners must make a copy of their ticket and place it in a safe place. The news of winning the lottery should be shared with a few people only, if possible.
For the Powerball Jackpot, the prize is nearly a half-billion-dollar already. For Wednesday’s night draw, the top prize is approximately $490 million or $355.1 million cash while the Mega Millions jackpot has reset to $20 million or $14.5 million cash for the next draw Friday night.