MONEY BAWL
MEGA TAX BILL IF N.Y.ER HITS $1.6B
Before you pop on down to your bodega to buy a Mega Millions ticket, perhaps first considering moving to California to do so. Or Florida. Or Delaware.
That’s because winners in the Empire State face the highest state withholding tax in all 50 states, at a whopping 8.82%, according to USA Mega.
If a New York State resident beats the 1-in-302-million odds to score the estimated $1.6 billion prize in Tuesday’s Mega Millions drawing and chooses the annuity, they’ll take home an average of nearly $36 million per year – which comes to a cool $1.07 billion after 30 payments.
If a New Yorker opts for the lump sum, the net payout would amount to a cool $607 million – meaning nearly $1 billion of the jackpot amount would go to taxes and withholdings.
And that’s not to mention the additional 3.876% the state withholds if you live in New York City or 1.323% if you call Yonkers home.
While pocketing upwards of $600 million isn’t a deal, winners in California, Delaware, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming won’t face any state taxes on lottery prizes.
A Mega Millions winner from those states would take home about $40.5 million per year for the annunity (bumped to $1.22 billion after 30 payments), or a lump sum with a net payout of $687 million.
Other states also face lottery taxes, but none are as steep as New York’s. The lowest comes from North Dakota, which withholds just 2.9% from winnings.
Even so, know that should you buy a ticket in a different state, you’ll still have to pay taxes based on the rate of your home state.
Winners’ earnings will also be reduced by a 24% federal tax withholding, down 1% this year from previous years.
No matter the amount pocketed, winners’ adjusted gross incomes will definitely top $500,000 – meaning they’ll be in the top income tax bracket for individuals, which is 37%.
Winners should also know that the IRS allows lottery winners to give up to $15,000 to as many people as they want each year without a tax benefit to the giver and without a tax on the receiver.