2 min

Mega Millions After Taxes (Best & Worst States)

Aug 25, 2022
in a nutshell
  • In the U.S., all winners have to pay federal taxes before you even see a dollar of your winnings.
  • Each state has different rules when it comes to taxing lottery winnings.
  • The worst state to hit the Mega Millions jackpot in is New York.
Image of Here are the best and worst states to hit the Mega Millions jackpot after taxes.
in a nutshell
  • In the U.S., all winners have to pay federal taxes before you even see a dollar of your winnings.
  • Each state has different rules when it comes to taxing lottery winnings.
  • The worst state to hit the Mega Millions jackpot in is New York.

Depending on where you live, the amount taxes you’ll pay on your winnings will vary dramatically. “One of the problems for lottery winners when it comes to paying taxes is they think, ‘This is all mine, why should I have to pay taxes?’” says Susan Bradley, a certified financial planner and founder of the Sudden Money Institute in Palm Beach Gardens, Florida.

In some other countries, like Canada and the United Kingdom, lottery winnings are not taxed, says Bradley, who has advised past lottery winners.

In the U.S., all winners have to pay federal taxes. Before you see a dollar, Uncle Sam will take 25% and, when tax time comes around, you’ll probably owe more, since the top federal tax rate is 37%. The remaining taxes “will be due in April of 2023,” if you were to hit the jackpot tonight, says Bradley.

That doesn’t include state taxes. Each state has different rules when it comes to taxing lottery winnings.

Here are the best and worst states to win the $421 million Mega Millions jackpot, according to USAMega.com.

The worst states in which to hit the Mega Millions jackpot

5. Maryland

Top tax rate on lottery prizes: 8.95%

Estimated state tax bill: $26 million

4. Minnesota

Top tax rate on lottery prizes: 9.85%

Estimated state tax bill: $28.7 million

3. Oregon

Top tax rate on lottery prizes: 9.9%

Estimated state tax bill: $28.8 million

2. Tied: New Jersey, and Washington, D.C.

Top tax rate on lottery prizes: 10.75%

Estimated state tax bill: $31.3 million

1. New York

Top tax rate on lottery prizes: 10.9%

Estimated state tax bill: $31.7 million

The best states in which to hit the Mega Millions jackpot

1. Tie: California, Florida, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming

If you’re lucky enough to live in one of these states, you’ll pay no state tax on your Mega Millions winnings.

In 2018, Shane Missler, a Florida resident who was then 20 years old, hit a $451 million Mega Millions jackpot. He chose to receive his winnings in a one-time, lump-sum payment in the amount of $281.8 million, according to MegaMillions.com.

If Missler had lived in New York and won that same jackpot, he would have had to pay 10.9% to the state of New York, which comes out to an additional tax bite worth $30.7 million, according to USAMega.com.

This material has been presented for informational and educational purposes only. The views expressed in the articles above are generalized and may not be appropriate for all investors. The information contained in this article should not be construed as, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy or hold, an interest in any security or investment product. There is no guarantee that past performance will recur or result in a positive outcome. Carefully consider your financial situation, including investment objective, time horizon, risk tolerance, and fees prior to making any investment decisions. No level of diversification or asset allocation can ensure profits or guarantee against losses. Article contributors are not affiliated with Acorns Advisers, LLC. and do not provide investment advice to Acorns’ clients. Acorns is not engaged in rendering tax, legal or accounting advice. Please consult a qualified professional for this type of service.

Sofia Pitt

Sofia Pitt was a reporter for Grow.

Acorns Logo
Acorns
Over 11 million sign ups
Get started Get the app