A lot of people who play or at least hear about the Mega Millions jackpots are surprised to discover that the announced prize is never what gets to the bank account of winners. Aside from taxes, the payout changes according to how the winner decides to get paid. On the other hand, our Mega Millions payout and tax calculator can let you figure out the numbers with precision.
- With our calculator, you can determine federal and state tax rates for your winnings and final payout.
- This tax calculator generates an estimation of taxes due and does not represent tax advice.
- The annuity payment option is structured around 30 installments paid over 29 years.
- The cash lump payment is the jackpot prize offered at the time of the draw.
MegaMillions Payout & Tax Calculator
Federal rate:
24%
State rate:
0
%
Why Is the Mega Millions Payout Different From the Jackpot?
First of all, the announced jackpot is before taxes. If even the earnings from our hard work have to be shared with the government, it is no surprise that a life-changing lottery prize has to be as well. That already includes the federal and possible state taxes on lotteries, which is enough to reduce our prize a lot.
However, the major reduction that is completely obscure to those who do not read the rules is the fact that the announced jackpot is not the actual prize. Well, at least not if you prefer to claim it all at once.
As a winner, you face a choice of being paid in one of two ways: Cash Option or Annual Payouts. The parameters for each method can vary between states, but the general rules are in sync.
If you are impatient and want to get your money immediately, go with the Cash option, which is a lump-sum payment. However, you need to be aware that this option drastically reduces the payout amount, considering taxes are instantly paid and depending on your state tax rates, you can lose up to 40% of your total winnings.
The alternative option is annual payments, consisting of one immediate payment and 29 annual payments. The good news is that each payment increases by 5% compared to the previous annuity as a mechanism to combat inflation. This feature might result in larger winnings over time. But, it’s not without risk because your annuity payment is taxed based on the current tax rate for that fiscal year, and taxes can change over a long period of three decades.
Typically, lottery winners prefer ‘lump-sum payment’ over ‘cash option’, but it’s worth considering the value of lump sum over annuities before making a decision.
Mega Millions Payout and Taxes Calculator Explained
There are three important fields that require your attention in order to make this Mega Millions payout and taxes calculator work:
- Prize Amount: The total announced jackpot, regardless of the option that you will pick.
- State: The state where you will play it.
- Payout Method: Annuity or lump-sum payment, simple as that.
When you fill in those fields and calculate, the system will automatically determine the following:
- Estimated Gross Payout: The amount that you wished so strongly for when you were playing the lottery. It already considers the lump-sum payment deduction.
- Estimated Total Taxes Withheld: The amount that is deducted in the form of taxes.
- Estimated Net Payout: The estimated amount that you would be paid after taxes.
Under the Mega Millions payout and taxes calculator, you will find tables for both options with the values and deductions in the correct order. Except for Mega Millions, you can calculate taxes for any lottery.
Mega Millions Payout and Tax for Foreign Players
In the case that you are a foreigner who has purchased a Mega Millions ticket locally, you will have almost the same treatment. The federal tax for foreigners in the United States is 30% instead of 24%, which will decrease your payment a bit more.
If you are playing Mega Millions through online lottery sites, you will be playing as a foreigner. In that case, lottery agents will require you to claim your Mega Millions jackpot in person, and the same rules above apply to you – which means 30% in federal taxes plus everything else and your taxes on lottery winnings and income at home.
Now, if you play online through lottery betting sites, they will mimic the tax and prize deductions of Mega Millions, even though they would not need to. In other words, you may try, but you will not avoid lottery taxes playing Mega Millions as a foreigner.
Some countries are exempt from lottery winning’s tax withholding because of existing tax treaties. A few examples are Austria, Belgium, the Czech Republic, Luxembourg, France, Germany, Iceland, Ireland, Japan, Spain, and the United Kingdom. Treaties can change, so always check with the IRS to see if your country is eligible for a reduced tax rate.