Here's just a little explanation about taxes with the lottery: You may have heard there is officially one winner for the $1.128 billion Mega Millions jackpot. A single ticket sold in New Jersey won the game’s fifth-largest grand prize after matching all six numbers drawn recently. The lucky winner will choose between two options: an annuitized prize worth $1.128 billion or a lump-sum payout of $536.6 million cash. A CPA clarified what we’ve always heard saying: Regardless of the payout option, “you’re losing almost half of it” to taxes. New Jersey taxes prizes over $10,000 and the winner will owe millions to the state, including a mandatory withholding, on top of their federal tax bill. Before seeing a penny of the jackpot, the winner will pay a 24% mandatory upfront federal withholding to the IRS. If they choose the $536.6 million cash option, the 24% withholding automatically reduces the prize by about $129 million. However, the jackpot pushes the winner into the top federal tax bracket, which is 37% for 2024. After the 24% withholding, the winner could still owe another 13% in federal taxes, or about $70 million.
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