Millions of hopefuls felt disappointed after they discovered Tuesday night that their Mega Millions lottery tickets did not match the winning numbers. The outlandish odds of winning the lottery did not discourage many Georgians from purchasing a ticket. The jackpot had reached $1.6 billion, breaking the 2016 record for the highest lottery jackpot in U.S. history.
The winning ticket was purchased not in Georgia, but in our neighboring state of South Carolina. The winning buyer will no doubt feel exuberant for their newly won wealth, but they will also have to cope with a significant tax loss, as well.
What are the Mega Millions’ tax withholdings?
Mega Millions advertises their jackpot sum as $1.6 billion, but the lucky winner will actually receive only $905 million if they accept a lump sum, or $53 million annually if they accept the annuity.
Lottery winnings are not tax-exempt. They are subject to state and federal taxes, just like other forms of income. So, for example, a Mega Millions winner who accepts the lump sum will have to pay a 37% tax rate, or $330 million of their jackpot winnings. The IRS initially withholds 24 percent of the lotto earnings, and collects the rest at the end of the year.
Lottery winners, like everyone, need tax advice
Some people who win the lottery end up in trouble with the law for incorrectly filing their taxes, or failing to pay taxes completely. In this respect, lottery winners are just like anyone else: They could use knowledgeable advice from a professional regarding tax law.
People who have low and high incomes alike sometimes need legal counsel regarding taxes. This can help you comply with state and federal law, minimize your taxes, remove wage garnishments or levies and protect your finances.