The Mega Millions jackpot has surged to $1.15 billion, marking the fifth-largest prize in the game’s history. However, the actual take-home amount depends on your payout choice and the taxes owed.

Federal taxes apply to all lottery winnings, with 24% automatically withheld. For billion-dollar winnings, the top tax bracket rate of 37% will likely apply when filing your 2024 tax return. State taxes, ranging from 3% to 10.9%, further reduce winnings, with New York imposing the highest rate.

Eight states exempt lottery winnings from state taxes: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming. Residents of these states can claim the full prize, which equals $325,184,812 as a cash lump sum or $725,754,360 through a 30-year annuity, as estimated by usamega.com.

40K Mega Millions Tim Todd web
A picture of a Maryland man winning $40,000 last Sept 2024 at the Mega Millions lottery.

Winners often choose the lump sum for immediate access to funds, though the annuity option offers a larger total payout over time. By comparison, New York residents could lose up to $125 million on the annuity due to state taxes.

Where you purchase the ticket also matters, as out-of-state winnings may be taxed by the state of purchase. Home states usually require reporting but may offer credits or deductions for taxes paid elsewhere. Consulting a tax professional is recommended to navigate state-specific laws and optimize payout options.

The next Mega Millions drawing is scheduled for Friday, December 27, 2024, at 11 p.m. ET.