Uncover Mega Millions tax implications with our detailed guide. Learn how federal and state taxes affect your prize, explore the differences between lump sum and annuity options, and get expert tips to navigate the tax process. Ensure you know what to expect when you win big!
How Are Mega Millions Taxes Calculated?
Mega Millions taxes are calculated based on the prize amount and the tax laws applicable to the winner’s state and federal tax obligations. Read more below.
When Do You Have to Pay Mega Millions Taxes?
The amount you win influences the amount of Mega Millions taxes you end up winning. Here’s how:
- Winnings less than $600: no tax on your lottery winnings in US when you win under $600.
- Winning more than $600: This is the threshold that makes the difference. You may end up paying a federal tax of 24% + a state and/or city tax where you purchased your Mega Millions ticket.
How is Mega Millions Taxed Depending on How You Choose to Collect the Jackpot?
When you become one of the biggest Mega Millions winners, you get to choose how to collect your jackpot. There are 2 available options: the lump sum which is collected as a single payment, or the annuity which is paid out over 29 years.
Mega Millions taxes vary based on the option you pick.
Imagine checking the Mega Millions results and discovering you’ve hit a $1.5 billion jackpot. Opting for the lump sum payment means you’d receivearound $930 million, which is less than the publicized $1.5 billion. The full $1.5 billion prize would be awarded through the annuity option, which is paid out over the span of 29 years in 30 yearly instalments. The annuity is more lucrative over time as the starting sum of $930 million accrues interest while it’s invested on your behalf before it’s paid out to you
How Much Is the Federal Tax on NJ Mega Millions Winnings?
There is a federal tax on NJ Mega Millions winnings of 24% for prizes over $5,000. Moreover, state taxes and/ or city taxes may influence the final Mega Millions taxes amount.
How Much is Mega Millions Taxed in Every State?
As mentionned above, Mega Millions taxes include a 24% federal tax, along with a state tax that ranges from 5 to 8% in New Jersey.
It’s important to recognize that each state has the authority to levy its own tax on lottery prizes won within its jurisdiction.
While some states exempt lottery winnings from taxes, others impose taxes as high as 10.9%.
Our interactive map is available to illustrate Mega Millions taxes across different states; states shaded darker indicate higher taxation levels:
| State | Tax |
|---|---|
| Arizona | 4.8% for residents |
| 6% for non-residents | |
| Arkansas | 5.9% |
| California | Not applicable |
| Colorado | 4% |
| Connecticut | 6.99% |
| Delaware | Not applicable |
| Florida | Not applicable |
| Georgia | 5.75% |
| Idaho | 6.925% |
| Illinois | 3.75% |
| Indiana | 3.23% |
| Iowa | 5% |
| Kansas | 5% |
| Kentucky | 5% |
| Louisiana | 5% |
| Maine | 5% |
| Maryland | 8.95% for residents |
| 8% for non-residents | |
| Massachusetts | 5% |
| Michigan | 4.25% |
| Minnesota | 7.25% |
| Mississippi | 3% – 5% |
| Missouri | 4% |
| Montana | 6.9% |
| Nebraska | 5% |
| New Hampshire | Not applicable |
| New Jersey | 5% – 8% |
| New Mexico | 6% |
| New York | 10.9% |
| North Carolina | 5.5% |
| North Dakota | 2.9% |
| Ohio | 4% |
| Oklahoma | 4% |
| Oregon | 8% |
| Pennsylvania | 3.07% |
| Puerto Rico | Not applicable |
| Rhode Island | 5.99% |
| South Carolina | 7% |
| South Dakota | Not applicable |
| Tennessee | Not applicable |
| Texas | Not applicable |
| Vermont | 6% |
| Virginia | 4% |
| Washington | Not applicable |
| Washington, D.C. | 8.5% |
| West Virginia | 6.5% |
| Wisconsin | 7.65% |
| Wyoming | Not applicable |
How Much is Mega Millions Taxed in NJ?
When a New Jersey resident wins a jackpot, they face an initial federal tax withholding of 24% and a state tax rate that could be up to 8%, depending on the total prize amount.
What Mega Millions Taxes Do You Pay on Prizes Won Online?
Lottery winnings obtained online are subject to taxation in the same manner as any other prize. Lottery organizations usually directly deduct 24% from any winnings exceeding $5,000 as a prepayment towards taxes. Should your total tax liability exceed this withheld amount, you will be responsible for paying the remaining balance.
Key Takeaways on Mega Millions Taxes
- Mega Millions prizes exceeding $600 are subject to taxation. Winnings below $600 are exempt from taxes.
- There is a 24% federal tax on taxable lottery winnings.
- Additionally, state and/or municipal taxes apply, which differ by location. For instance, New Jersey imposes a tax rate ranging from 5% to 8%.
- The collecting method, whether as a one-time lump sum or as an annuity, affects the total tax amount due.
Mega Millions Taxes FAQ
You will have to pay Federal Taxes (24%) & State Taxes that vary by state (2.5% to 8%) when you participate to the Mega Millions lottery.
No, lottery winnings obtained online are subject to the same taxation as if you had purchased your tickets officially at an official retailer.
We recommended you consult with a tax professional for a precise calculation and to understand the full tax implications when you win a significant lottery prize. We hope our extensive guide on Mega Millions taxes has helped you better understand how much you will most likely end up paying. Now, start playing Mega Millions online to get your own chance.