The Mega Millions jackpot reaches $1.15 billion – 8 states with no winnings tax

The Mega Millions jackpot has risen to $1.15 billion ahead of Friday’s drawing, making it the fifth-largest prize in the game’s history.

But how much you’d actually take home could be less than half that, depending on both your withdrawal choice and how much you’d owe in federal and state taxes.

Everyone owes federal taxes on lottery winnings. While 24% is automatically withheld up front, you would almost certainly owe a total of 37% when you file your 2024 tax return, since a billion dollar profit would put you in the top tax bracket.

State taxes on lottery winnings in the United States generally range between 3% and 6%, with New York charging the highest rate at 10.9%. However, eight states do not tax lottery winnings at all:

• California
• Florida
• New Hampshire
• South Dakota
• Tennessee
• Texas
• Washington
• Wyoming

If you live in one of these states, you’ll take home the maximum payout. According to usamega.com, that works out to a cash balance of $325,184,812 or a 30-year annuity totaling $725,754,360.

While the cash payout is significantly less than the annuity, winners usually take the lump sum because they receive more money immediately.

Compared to the taxes you might pay in New York State, that’s a difference of $125,349,990 for the pension and $56,254,900 for the cash lump sum.

It also matters where you purchase the ticket, as a winning ticket purchased out of state may be subject to that state’s taxes. In most cases, your home state will require you to report winnings won out of state, but will typically offer you a credit or deduction for taxes paid to the other state.

Lottery tax laws vary from state to state. So if you win a lottery prize in a state other than your own, consult a tax professional. They can also help you determine the best withdrawal option based on your financial goals.

The next Mega Millions drawing will take place on Friday, December 27, 2024 at 11:00 p.m. ET.

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