- 3,937
- 2,069
Dont be fooled. A $290M jackpot is much less than you thin it may be. Its still alot, but much less than what you think.
Multi state lotteries like Mega-Millions and Powerball exaggerate their jackpot amounts to get people to go out and buy tickets.
When you see a $290M jackpot, that is NOT the amount of cash that has built up in the prize pool.
The $290M jackpot is calculated based on the amount of actual cash in the pot (half of 290) plus the interest that will be generated over the time of the annuity
(Mega-Millions -26yrs, Powerball - 30yrs)
When taking the annuity payment, your money (about half of jackpot- $145M) is used to buy U.S. Government Treasury Securities, which earn interest and mature annually
over 26 or 30 years. The annual return is your annuity payment. You pay federal and state taxes as you receive your money.
When calculating the cash option, you dont get the luxury of interest accrued.
You get paid from the pool of actual cash collected, from the sales of lottery tickets. Thus the name "cash option" Which in this case is $145M( half of $290M)
Then, everyone must pay federal income taxes of 25%.
So $145M - $36,250,000(25% 0f $145M)= $108,750,000
Then you must pay whatever your state income tax is.
So for example: California, Delaware, Pennsylvania, South Dakota, Tennessee, Texas, dont have a state income tax, so they would pay nothing else.
But a state like Maryland with a 9.25% state withholding it would be $108,750,000- $10,059,375= $98,690,625
In addition to federal and state tax, most states will deduct other money that you may owe to the state, such as back taxes, child support, loan payments, etc. The state tax withholdings are as follows:
Arizona 5% state withholding (Arizona residents), 6% state withholding (non-Arizona residents)
Arkansas 7% state withholding
California No state tax on lottery prizes
Colorado 4% state withholding
Connecticut 6.5% state withholding
Delaware No state tax on lottery prizes
Georgia 6% state withholding
Idaho 7.8% state withholding
Illinois 3% state withholding
Indiana 3.4% state withholding
Iowa 5% state withholding
Kansas 5% state withholding
Kentucky 6% state withholding
Maine 5% state withholding
Maryland 9.25% state withholding (Maryland residents), 7.5% state withholding (non-Maryland residents)
Massachusetts 5% state withholding
Michigan 4.35% state withholding
Minnesota 7.25% state withholding
Missouri 4% state withholding
Montana 10% state withholding
Nebraska 5% state withholding
New Hampshire 10% state withholding
New Jersey 10.8% state withholding
New Mexico 6% state withholding
New York 8.97% state withholding, plus: 3.648% (NYC residents), 0.897% (Yonkers residents)
North Carolina 7% state withholding
North Dakota 5.54% state withholding
Ohio 6% state withholding
Oklahoma 4% state withholding
Oregon 8% state withholding
Pennsylvania No state tax on lottery prizes
Rhode Island 7% state withholding
South Carolina 7% state withholding
South Dakota No state tax on lottery prizes
Tennessee No state tax on lottery prizes
Texas No state tax on lottery prizes
Vermont 6% state withholding
Virginia 4% state withholding
Washington No state tax on lottery prizes
Washington, D.C. 8.5% state withholding
West Virginia 6.5% state withholding
Wisconsin 7.75% state withholding
Multi state lotteries like Mega-Millions and Powerball exaggerate their jackpot amounts to get people to go out and buy tickets.
When you see a $290M jackpot, that is NOT the amount of cash that has built up in the prize pool.
The $290M jackpot is calculated based on the amount of actual cash in the pot (half of 290) plus the interest that will be generated over the time of the annuity
(Mega-Millions -26yrs, Powerball - 30yrs)
When taking the annuity payment, your money (about half of jackpot- $145M) is used to buy U.S. Government Treasury Securities, which earn interest and mature annually
over 26 or 30 years. The annual return is your annuity payment. You pay federal and state taxes as you receive your money.
When calculating the cash option, you dont get the luxury of interest accrued.
You get paid from the pool of actual cash collected, from the sales of lottery tickets. Thus the name "cash option" Which in this case is $145M( half of $290M)
Then, everyone must pay federal income taxes of 25%.
So $145M - $36,250,000(25% 0f $145M)= $108,750,000
Then you must pay whatever your state income tax is.
So for example: California, Delaware, Pennsylvania, South Dakota, Tennessee, Texas, dont have a state income tax, so they would pay nothing else.
But a state like Maryland with a 9.25% state withholding it would be $108,750,000- $10,059,375= $98,690,625
In addition to federal and state tax, most states will deduct other money that you may owe to the state, such as back taxes, child support, loan payments, etc. The state tax withholdings are as follows:
Arizona 5% state withholding (Arizona residents), 6% state withholding (non-Arizona residents)
Arkansas 7% state withholding
California No state tax on lottery prizes
Colorado 4% state withholding
Connecticut 6.5% state withholding
Delaware No state tax on lottery prizes
Georgia 6% state withholding
Idaho 7.8% state withholding
Illinois 3% state withholding
Indiana 3.4% state withholding
Iowa 5% state withholding
Kansas 5% state withholding
Kentucky 6% state withholding
Maine 5% state withholding
Maryland 9.25% state withholding (Maryland residents), 7.5% state withholding (non-Maryland residents)
Massachusetts 5% state withholding
Michigan 4.35% state withholding
Minnesota 7.25% state withholding
Missouri 4% state withholding
Montana 10% state withholding
Nebraska 5% state withholding
New Hampshire 10% state withholding
New Jersey 10.8% state withholding
New Mexico 6% state withholding
New York 8.97% state withholding, plus: 3.648% (NYC residents), 0.897% (Yonkers residents)
North Carolina 7% state withholding
North Dakota 5.54% state withholding
Ohio 6% state withholding
Oklahoma 4% state withholding
Oregon 8% state withholding
Pennsylvania No state tax on lottery prizes
Rhode Island 7% state withholding
South Carolina 7% state withholding
South Dakota No state tax on lottery prizes
Tennessee No state tax on lottery prizes
Texas No state tax on lottery prizes
Vermont 6% state withholding
Virginia 4% state withholding
Washington No state tax on lottery prizes
Washington, D.C. 8.5% state withholding
West Virginia 6.5% state withholding
Wisconsin 7.75% state withholding
