If you’re lucky enough to take home the lottery prize, you have two options: take a lump sum or an annuity with annual payments over 30 years. If you take the annuity, you’ll get one payment immediately, and then 29 additional annual payments. The amount of each payment increases 5 percent per year. The total of all 30 payments is equal to the jackpot amount.
The Real Dollar Figures of Winning This Lottery
If you were to take the cash option of $335 million, about $80.4 million will be withheld for federal taxes. Then you’d still need to pay roughly $114,140,000 when your tax return is due. Then, there are state taxes on the winning amount. For example, South Carolina has 7 percent state tax.
Hopefully the ticket will be won in Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington or Wyoming. Those states have no income tax.
RELATED: Take a look at lottery winner throughout history:
Lottery winners throughout history
Lottery winners throughout history
Great Grandmother Elizabeth Jones, aged 71, from Warrington in Cheshire who won #8,355,262 (US$13,368,400) in last Saturday night's national lottery poses for photographers with a crystal ball May 5. Jones' granddaughter was told of a windfall this May by a spritualist she visited in October 1997.
Shirley and Frank Capaci show off a check for $104,300,000 during a photo opportunity in Pell Lake, May 27. The Capacis won the largest lottery prize in U.S. history in the "Powerball" drawing of May 20, 1998. Looking on is state of Wisconsin Lottery Director Don Walsh (R).
Sean and Alex Taylor from Whitwick, Leicestershire celerbrate after scooping the jackpot of ?9,512,277 on the National Lottery in Birmingham May 6. The pasties delivery man who has three children screamed with disbelief when he realised the size of his win.
Lucky lottery winner Bruno Calonne (C)holds a board December 3, with the amount of 69.378.690 francs ($ 13.8 million) he won in yesterday's draw, in this northern France city. He is France's biggest winner in the national lottery since it was founded in 1976. L and R are the unidentified loto shop clercks
Powerball Lottery winner Andrew "Jack" Whittaker (R) holds a copy of
his check at lottery headquarters in Charleston, West Virginia, on
December 26, 2002, after winning the $314.9 million jackpot. Looking on
at left are members of Whittaker's family (L to R) daughter Ginger,
grandaughter Brandi Bragg, and wife Jewell. REUTERS/John Sommers II
Joanne (L) and Jorge (R) Lopes of Englishtown, New Jersey, receive
their check for almost $59 million in Trenton, New Jersey April 30,
2002. Jorge Lopes bought the quick-pick Big Game ticket as one of five
he purchased at a foodmart. The couple took home the largest ever
single ticket prize in New Jersey. REUTERS/Chip East
Erika Greene of Lawrenceville, Georgia holding the display check given
to her at the Georgia Lottery headquarters as she and her mother Vicki
Chambless (R) laugh during a press conference in Atlanta, Georgia,
April 17, 2002. Greene who is one of three winners of the Big Game,
bought her winning ticket at Rans Texaco in Dacula, Georgia and will
receive $58,938,743 before taxes. REUTERS/Tami Chappell
Filipino-born hospital worker Pedro Sotomil (R), representing the PFK
Family Partnership, smiles as he is presented a ceremonial check by
Lori Montana (L), director of the Illinois Lottery, at a press
conference in Chicago May 17, 2002, where he claimed his portion of the
$331 million Big Game jackpot. REUTERS/Sue Ogrocki
Sheryel Hanuman (L) of Minneapolis receives a check from George
Andersen, director of the Minnesota State Lottery, at the Lottery's
office in Roseville, Minnesota, August 27, 2001 during the press
conference announcing her as one of four winners of the $295 million
Powerball lottery jackpot from the August 25 drawing. Hanuman plans to
take the cash option of $41.4 million ($27 million after tax
withholding). Hanuman, married and the mother of three boys, bought
five one dollar tickets at a Cub Fods grocery store while shopping for
a friend's wedding card.
EuroMillions lottery winner Angela Kelly smiles as she holds a copy of her winning cheque at a news conference at Airth Castle, Scotland August 15, 2007. Kelly, Britain's biggest lottery winner, was stunned into silence when she realised she'd scooped 35 million pounds ($71 million) with a single ï¿½1.50 ($3) ticket. REUTERS/David Moir (BRITAIN)
Powerball Lottery winners, from left to right, Chasity Rutjens, Alain Maboussou, and Dung Tran, celebrate after each was awarded a check for their share of the record $365 million jackpot in Lincoln, Nebraska February 22, 2006. The group of eight winners selected the cash option, awarding each person US$22,162,500 before tax withholdings. REUTERS/Chris VanKant
Winners of the record $340 million lottery Powerball look at the winning check in Salem, Oregon, November 8, 2005. The winners are: (L-R standing) Frances Chaney, Steve West, Carolyn West and Robert Chaney (seated). The winning ticket will be split between members of the Chaney and West families of Medford, Oregon. The $340 million jackpot drawing on October 19, 2005 was the largest Powerball jackpot ever won and the second largest worldwide jackpot ever. REUTERS/Steve Dipaola
Paul White (L), 45, from Ham Lake, Minnesota, stands with his partner Kim VanReese (C) and co-worker Nancy Bowen (R) as he holds a check for his $149.4 million portion of a $448.4 million Powerball jackpot prize at a news conference at Minnesota State Lottery headquarters in Roseville, August 8, 2013. White, the first to come forward to claim his money, was one of three winners of the jackpot. REUTERS/Eric Miller (UNITED STATES - Tags: SOCIETY)
Powerball lottery winners known as "The Ocean's 16 group", comprising of workers from an Ocean County garage, pose for a picture after a news conference in Tom's river, New Jersey, August 13, 2013. Sixteen county maintenance department workers from New Jersey submitted the second winning ticket on Monday in the $448 million Powerball lottery, officials said. The group from Ocean County, on the Jersey shore, was presented with a check for $86,054,355, their share of the jackpot after taxes, lottery officials said. REUTERS/Eduardo Munoz (UNITED STATES - Tags: SOCIETY)
John Mandley (L) of the Maryland State Lottery is pictured with the ?Three Amigos? who claimed their part of record-breaking Mega Millions jackpot in this picture released to Reuters on April 10, 2012. The Maryland Lottery?s Mega Millions winners are three friends, all of whom work in Maryland?s public education system, who will share the $218.6 million portion of the record-breaking $656 million jackpot from March 30. The winners, who referred to themselves as ?The Three Amigos,? chose the cash option of $158 million. After taxes, the winners will share $105 million, taking home just under $35 million each. REUTERS/Maryland State Lottery/Handout (UNITED STATES - Tags: SOCIETY) FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS
Mega Millions Jackpot winner Merle Butler (R) and his wife Patricia pose with their check along with Red Bud Mayor Tim Lowry (L) and Illinois Lottery superintendent Michael Jones during a press conference at Red Bud City Hall in Red Bud, Illinois, April 18, 2012. The retired couple described as "good people" by residents of this picturesque Illinois town claimed their one-third share of a record $656 million Mega Millions lottery prize on Wednesday, saying they would invest most of the money. The winning couple, Merle and Patricia Butler, married for 41 years, have lived all their lives in Red Bud, a tidy farming and manufacturing community of 3,700 people in southern Illinois, named for the trees that tower all over town. REUTERS/Illinois Lottery/Handout (UNITED STATES - Tags: SOCIETY) FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS
Tom Delacenserie (L), Secretary of the Florida Lottery poses with Maureen Smith and David Kaltschmidt of Melbourne Beach with an oversized check after opting to claim their share in a lump sum payment in a winning ticket, worth $528.8 million, from the Jan. 13 drawing at the state's lottery headquarters in Tallahassee February 17, 2016. The Florida couple claimed their share of last month's record $1.6 billion U.S. Powerball lottery jackpot on Wednesday, coming forward with the second of the three winning tickets. REUTERS/Don Juan Moore
Powerball jackpot co-winners Lisa and John Robinson of Munford, Tennessee, their daughter Tiffany Robinson (L) and Tennessee Lottery President and CEO Rebecca Hargrove attend a news conference at the headquarters of the Tennessee Lottery in Nashville, Tennessee January 15, 2016. The couple revealed on the TODAY television show that they held a winning ticket to claim their share of the $1.6 billion Powerball prize. REUTERS/Harrison McClary TPX IMAGES OF THE DAY
Manuel Franco of West Allis, Wis., winner of second-highest Powerball lottery in history, attends a news conference at the Wisconsin Department of Revenue in Madison, Wis., on Tuesday, April 23, 2019. At right is Peter Barca, state secretary of revenue, and at right is Cindy Polzin, state lottery director. Franco claimed the cash option payout of the prize, totaling approximately $477 million before taxes. The overall jackpot of the prize, drawn March 22, was $768,400. (John Hart/Wisconsin State Journal via AP)
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Taking the annuity payment means you’ll pay the taxes a little at a time, just as you get your winnings each year.
The jackpot is always the before-tax number. Lottery winnings are considered income, so you will pay regular federal, state and local income taxes on your winnings with either the lump sum or annuity option. Before you even leave the lottery office, your winnings will be reduced by withholding. Federal tax withholding is 24 percent. State tax withholding varies by state — some states do not withhold anything, others withhold an amount equal to the state income tax.
The top federal tax bracket, which you will be in regardless of whether you choose the annuity or lump-sum option, is 37 percent, so you’ll also owe the difference of 13 percent when you file your taxes. For state and local taxes, you might owe additional tax beyond what’s withheld.
Where you buy your ticket matters. Arizona and Maryland have non-resident withholding rates, so if you live elsewhere but buy your ticket in one of those states, you might have double the taxes withheld. If you didn’t win the lottery this week, take solace in the huge amount you’ve saved in taxes. And remember, there are a lot of things you’re more likely to do than win the lottery.
The IRS considers unemployment compensation to be taxable income—which you must report on your federal tax return. State unemployment divisions issue an IRS Form 1099-G to each individual who receives unemployment benefits during the year.
Say you happily filed your tax return by the end of February and were the envy of all your friends, but in June you realized you forgot to include income from last summer's freelance job. Don’t worry, all you need to do is file an amended return using Form 1040X.
Congress sets the laws that change the current and future regulations around taxes. But some of these changes can also retroactively affect taxes from previous filings. You might be wondering, "Does that mean I can redo my taxes and save more?" We'll dive into that question and the answer below.
The IRS delayed many of the filing and payment deadlines for the 2019 federal tax year due to the coronavirus pandemic. States don't have to follow the IRS's lead but many have. Find out if your state tax deadlines are also extended.