THE Mega Millions player who came forward to claim the $1.128 billion prize in New Jersey is set to face a hefty tax bill heading into the new year.
Despite defying the odds of one in 302.6 million to land the top prize, the gambler will fork out millions to the government and state.
And, they can do nothing about the money they’re set to lose.
The winning slip dated back to a draw in March and was bought at a ShopRite store in Neptune.
State lotto officials revealed the player picked their numbers individually and bought just one slip.
The player had a choice of how they wanted to claim their prize – either in the form of a lump sum or annuity.
They opted to take the lump sum – an amount that has an estimated cash value of $537.5 million.
But, that figure is before federal and state taxes are wiped from the prize.
The player will pay a rate of 24% to the federal government, an estimated $129 million.
Then, because the amount is so huge, it will likely push the gambler into the top federal income tax bracket – which is 37%.
This means they could have to pay up to another 13% in taxes, which is just shy of $70 million, as reported by CNBC.
New Jersey has one of the highest lottery taxes for players.
The gambler, who came forward nine months after the numbers were drawn, will have to pay a rate of 8% to the state, which is an estimated $43 million.
Winners in California and Florida do not have to pay a tax on their winnings to the state.
Once the amounts have been tallied, the Mega Millions player could have to pay up to $242 million in tax.
The winning ticket holder’s identity remains a mystery, and they can remain anonymous under state law.
Lottery winnings: lump sum or annuity?
Players who win big on lottery tickets typically have a choice to make: lump sum or annuity?
The two payout methods can impact how much money you get from your prize.
Annuities pay out slowly in increments, often over 30 years.
Lump sums pay all at once but in a smaller amount, as taxes are withheld in one go. That means 24% of your prize goes to Uncle Sam right away. Many states tax winnings as well.
Annuities can provide winners time to set up the financial infrastructure required to take in a life-changing amount of money, but lump sums have the benefit of being taxed only once.
Inflation is also worth considering when making a choice, as payouts do not adjust with the value of a dollar. That means that you’ll likely be getting less valuable money towards the end of an annuity.
Each state and game pays out prizes differently, so it’s best to check with your state’s lottery to confirm payment policies. A financial advisor can also help you weigh the pros and cons of each option.
Experts have varying opinions on whether to take the lump sum or take the annuity.
A 2020 law has meant that New Jersey lotto winners have been able to keep their identity under wraps.
But, players who win over $600 must disclose their identity to New Jersey lotto officials.
The $1.128 billion prize was the fifth-largest jackpot in the history of the game.
The next Mega Millions draw takes place tonight, and the prize pot stands at an estimated $970 million.
It has a cash value of $439.9 million.
The jackpot wasn’t won on Friday night, but a slew of ticket holders managed to match five of the numbers.
They are set to walk away with an estimated $1 million prize each.
