By | July 21, 2022

You didn’t win Tuesday night’s $555 million Mega Millions Jackpot.

Is the glass half-full? Phew! You avoided a large tax bill.

You can get another chance in the next drawing to win a huge windfall, and then you can give it all to Uncle Sam. The top prize in the national lottery game has risen to $630 million, surpassing the half-billion mark. Friday’s draw saw it reach $630 million.

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Mega Millions would be the fifth-largest Mega Millions prize ever, but it is not among the top 10 largest jackpots.

It would also come with a substantial tax bill. Taxes can take a significant chunk out of any prize winnings, whether it is an annuity with 30 payments over 29 year or an immediate cash lump sum.

$86.3 million would be withheld from the bat

The cash option for this $630 million jackpot is $359.7million. This is the choice of most winners. Your winnings would be reduced by $86.3 million if you pay a mandatory 24% federal tax withholding .

The top federal marginal tax rate of 37% applies to income greater than $539,900 for a single taxpayer and $647,850 to married couples filing jointly. This means that you could owe more tax time.

According to the American Institute of CPAs, one way to lower your tax bill is by thinking charitably. You can donate cash up to 60% of your adjusted income to a public charity, or donor-advised fund, and receive a tax deduction for that amount for the year. A private foundation could be created, with income donated to it. Then you can decide how to use it.

If there was no income reduction, an additional 13% or $46.7million would be owed to the IRS ($133,000,000 in total).

This would bring the net result down to $226.7 millions.

You may also be subject to state taxes. These levies may be higher than 10% if you don’t live in an area where income taxes or lottery winnings are not taxed. It all depends on where you purchased the ticket and where your residence is.

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Even with a large tax bill, the windfall is still more than most people will ever see in their lifetime. Jackpot winners should form a team with professionals to assist them in navigating the claim process. This includes an attorney, tax advisor, and financial advisor.

Mega Millions has a 1 in 302 million chance that a single ticket will match all six numbers. Powerball, whose jackpot is $101 million Wednesday night’s drawing, has a 1 in 292,000,000 chance.

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