The Mega Millions jackpot hits $1.15 billion—8 states with no prize taxes

On By Littum

The Mega Millions jackpot has risen to $1.15 billion before Friday’s drawing, making it the fifth largest prize in the history of the game.

But how much you’d actually take home could be less than half, depending on both your withdrawal choice and how much you owe in federal and state taxes.

Everyone owes federal taxes on lottery winnings. While an automatic 24% is withheld upfront, you’d almost certainly owe a total of 37% when you file your 2024 tax return when you win a billion dollars in the top tax bracket.

State taxes on lottery winnings in the United States generally range from 3% to 6%, with New York imposing the highest rate of 10.9%. However, eight states do not tax lottery winnings at all:

  • California
  • Florida
  • New Hampshire
  • South Dakota
  • Tennessee
  • Texas
  • Washington
  • Wyoming

If you live in any of these states, you will take home the maximum payout. That equates to $325,184,812 as a cash lump sum or a 30-year annuity totaling $725,754,360, according to usamega.com.

While the cash payout is much smaller than the annuity, winners usually take the lump sum since they get more money right away.

Compared to the taxes you would pay in New York State, that’s a difference of $125,349,990 for the annuity and DKK 56,254,900. for the cash lump sum.

Where you buy the ticket is also important, as a winning ticket bought outside the state may be subject to taxes in that state. In most cases, your home state will require you to report out-of-state gains, but will usually offer you a credit or deduction for taxes paid to the other state.

State lottery tax laws vary, so if you win a lottery prize in a state other than your own, you should consult a tax professional. They can also help you determine the best payout option based on your financial goals.

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

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