Winner of $1 billion lottery faces massive tax bite — here's how much he takes home
A New Jersey resident who recently won the staggering $1.13 billion Mega Millions jackpot is now facing a substantial tax obligation that will considerably diminish their winnings. Opting for the cash payout, which amounts to $1.128 billion, translates to $536.6 million post-tax, following a significant 24% deduction by the IRS, totaling over $128.7 million. Moreover, New Jersey imposes an 8% state tax, resulting in an additional deduction of more than $42.9 million. Consequently, the winner is left with approximately $364,888,000 after taxes.
While some winners have the option to receive the full jackpot amount over thirty years through annuity payments, most choose to receive the cash lump sum due to its immediate availability. Under the annuity option, recipients receive one initial payment followed by twenty-nine annual installments, each increasing by 5% from the previous year.
"It’s also worth noting that if tax rates increase during the term of the annuity, then taxes are withheld at the rate that is in place at the time of the scheduled payment," a New Jersey Lottery spokeswoman explained.
According to Mega Millions officials, the initial net payment after taxes would amount to $8,928,556, gradually rising to $36,620,854 by the 30th year. In total, this method could potentially yield approximately $591,679,367, factoring in possible fluctuations in tax rates and investment gains.
The winning ticket was purchased at ShopRite Liquors in Neptune Township, marking New Jersey's first Mega Millions jackpot win since July 24, 2020. Over the years, the state has celebrated twenty-six Mega Millions jackpot wins since the game's inception in 2002, along with eleven Powerball jackpots.
"Congratulations to the New Jersey Lottery for selling a jackpot-winning ticket in Tuesday’s $1.13 billion Mega Millions drawing," Georgia Lottery President and CEO Gretchen Corbin, lead director of the Mega Millions Consortium, said in a release. "We celebrate our new jackpot winner, as well as all the prizes won and dollars raised for good causes during this exciting jackpot run."
The Mega Millions lottery offers the chance of a lifetime, but with staggering odds of 302,575,350 to 1 for matching all winning numbers, and 1 in 12,607,306 odds of winning at least $1 million by matching five numbers without the Mega Ball. Held on Tuesdays and Fridays across 45 states, Washington, D.C., and the U.S. Virgin Islands, Mega Millions draws captivate hopefuls nationwide.
In most states, lottery winnings are subject to taxation, with the tax deducted from the prize money before it's disbursed to the winner. However, the specifics of when and how much the winner pays in taxes vary by state.
Currently, 13 states, including Alabama, Alaska, California, Florida, Hawaii, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Utah, Washington, and Wyoming do not tax lottery winnings, as reported by USA Mega, an independent online resource for multi-state lotteries.
This exemption from state taxes offers significant advantages to winners, allowing them to retain a larger portion of their winnings compared to states with lottery taxation.
Editor's note: This article was originally published on April 1, 2024. It has since been updated.
