Winning ticket for Mega Millions $1.128 billion jackpot sold in New Jersey – here’s how much tax the winner will owe

Experts say there’s officially a winner for the $1.128 billion Mega Millions jackpot — and the taxman will take a big chunk.

A ticket sold in New Jersey won the game’s fifth-largest grand prize, the Mega Millions, after matching all six numbers drawn Tuesday night. announced Wednesday. The final jackpot fell from an estimated $1.13 billion to $1.128 billion based on actual ticket sales.

The lucky winner will choose between two options: an annual prize worth $1.128 billion or a lump sum cash payment of $536.6 million.

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Regardless of the payment option, “you’re losing about half of that in taxes,” said Albert Campo, a certified public accountant and president of AJC Accounting Services in Manalapan, New Jersey.

New Jersey Tax Over $10,000 in prizes And the winner will owe the state millions, including a mandatory withholding, on top of their federal tax bill, he said.

Eight states, including California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, do not tax lottery winnings.

Before seeing a dime of the jackpot, the winner will pay a 24% mandatory up-front federal withholding to the IRS.

If they choose the $536.6 million cash option, the 24% withholding automatically reduces the award by about $129 million.

However, the jackpot pushes the winner into the top federal tax bracket, which is 37% for 2024, Campo said. After the 24% withholding, the winner may still owe another 13%, or about $70 million, in federal taxes.

Of course, these are rough calculations. The winner’s federal tax bill will also depend on other income, credits or deductions.

As for state taxes, New Jersey automatically withholds 8% for payouts over $500,000, which would cost the winner another $43 million. Campo said the state’s withholding covers “a large portion,” but New Jersey’s top tax bracket is 10.75%.

“None of them really think about taxes” until the IRS and state government get a hefty chunk, said Chicago-based attorney Andrew Stoltman.

Mega Millions isn’t the only way to win big. The Powerball jackpot has climbed to an estimated $865 million from Monday night’s drawing without a big winner. The odds of scoring the grand prize for this game are approximately 1 in 292 million.