At a recent holiday party, an individual created an adorable Christmas tree out of green scratch off lottery tickets. Cute, clever, fun and it had everyone talking. Eventually, someone said, “image the taxes you’d have to pay if you won!”
So, for fun, here’s some info on what that actually looks like.
- Federal Taxes:
- 24% withheld immediately by the IRS.
- Potential total federal tax rate up to 37% (ordinary income tax bracket).
- State Taxes:
- Some states, like California and Florida, don’t tax lottery winnings.
- Others, like New York, impose high rates (up to 10.9%).
- Payout Options
- Lump Sum: Immediate access to winnings, but heavily taxed upfront.
- Annuity: Spread over 30 years, with annual installments increasing yearly.
Taxes apply to each installment.
Minimizing Tax Burden
- Consult a tax professional or financial advisor.
- Make charitable contributions to lower taxable income.
- Invest wisely to grow your wealth and offset taxes.
The Bottom Line
Winning the Mega Millions jackpot is life-changing, even after taxes. While the odds of winning are 1 in 302 million, someone eventually takes home the prize. And… hopefully they’ll be using ASRE to help shop for a new home!
Happy Holidays!
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