Are Mega Millions wins taxed?
21st July 2021 8:22 AM
Winning the Mega Millions lottery sounds astounding, but is there any fine print you need to be aware of? How much will you actually win? Keep reading to find out how taxes affect you.
The next Mega Millions jackpot has rocketed up to a massive $138,000,000 due to yesterday’s rollover. But how much of that jackpot is truly yours? How much is taxed if you win the lottery? Do tax-free winnings exist? Can you gift lottery winnings? Keep reading to find out the answers to all of your questions.
In this article, we will be taking a look at the fine print which is bound to come with every lottery. We will explore what the tax rate is in some countries, together with making clear any other details that are important when it comes to claiming a big lottery win.
‘Do you get taxed on lottery winnings in the UK?’ and ‘Do you get taxed on lottery winnings in Australia?’ are both common questions. This is because tax rates differ from one country to the other. If you happen to win as an American citizen, the tax rates even vary by state. So, how is lottery money taxed and how much tax do you pay on lottery winnings?
If you happen to be a Mega Millions jackpot winner, you will be offered a choice between receiving a lump sum of money or you may receive your prize in an annuity. If you have won as an American Citizen, then you must inform the IRS (International Revenue Service) and a federal tax of 39.6% will be taken.
Check the list below to see if you have to pay your state any state taxes together with the federal tax. If you are a lucky Mega Millions winner and a resident of one of the states mentioned below, you are not subject to a state tax.
- - Florida
- - New Hampshire
- - Puerto Rico
- - South Dakota
- - Tennessee
- - Texas
- - U.S. Virgin Islands
- - Washington State
- - Wyoming
If you win any prize in the UK national lottery you will be taxed 0% on your sum of money. However, any funds you deposit, or any gifts you give may be taxed. For UK residents, the prize money itself is not taxed before it reaches you, but once you deposit it into your account to use, it may be liable to taxation.
If you play and win in the Australian lotteries, you need to pay 0% in taxes! However, if the prize happens to be a house or a car, then you might be taxed on the value of your prize. If you decide to invest using your prize money, then the profit margin created might also be taxed by the Australian government. This is done under what is known as the Capital Gains Tax.
Below is a breakdown of all the federal tax rates different countries may incur upon winning most jackpots:
|Country||Percentage Taken from a National Lottery Jackpot Win|
Let’s make sense of these numbers with an example. If you are a resident of Florida, what will you have left of the $50 million jackpot after taxes? The first thing that you need to do is deduct the 39.6% which is taken as federal tax. Once you have done that, you must check if any state taxes apply to your win. In this case, you will be left with $19.8 million as no state tax is applicable.
If you do become a Mega Millions winner, you have two options. A) Have your winnings paid out in a lump sum, which is liable to a federal tax, or B) Have your winnings paid out to you over a period of time, usually 29/30 years. No matter which payout option you pick, and how much taxes you might be liable to pay, the Mega Millions draw still creates huge winners.
A group of people won the $516 million jackpot. These people decided to create a trust for the funds and, after taxes, they will be inflating their trust with a total of $254,233,980. That may be significantly less than what was advertised, but the final amount is still larger than the average Eurojackpot or Italy’s SuperEnaLotto jackpots.
Now that you know all about taxes and how they affect your grand jackpot, you can bet with a greater piece of mind. All of the cards are laid out on the table, the next move is yours. Will you try your luck at the next draw?
Page Last Updated: 21/07/2021 08:27:04