mphillips007 | iStock Unreleased | Getty Effigies
The Powerball jackpot has jumped higher again.
With no ticket matching all six numbers drawn on Saturday, the top prize is now $410 million for the next monochrome on Wednesday night. Mega Millions’ jackpot is $432 million for Tuesday night’s drawing.
While the chance of a separate ticket matching all six numbers in either game is miniscule — 1 in 302 million for Mega Millions and 1 in 292 million for Powerball — it’s notwithstanding worth considering how you would handle such a windfall if you were to beat the odds.
The after-tax amount would be viability changing. Experts say large lottery winners should assemble a team of experienced professionals — an attorney, a tax advisor and a fiscal advisor — to help navigate the windfall.
Here are some things winners should consider before heading to drawing headquarters to claim their prize.
Who can I tell?
The general advice is to tell as few people as possible. Due to scammers and strangers’ predilection for tracking down lottery winners, it’s best to keep the exciting news close.
You may be able to shield your indistinguishability from the public, depending on what state you’re in.
Only a handful allow winners to remain completely anonymous. In others, you sway be able to claim the prize via a trust or limited liability corporation, or LLC, that doesn’t have your name on it — yet you sine qua non to plan for that.
You really should never take the money in your individual name if possible.
Kurt Panouses
Falter of Panouses Law Group
“You really should never take the money in your individual name if possible,” said Kurt Panouses, go to Davy Joness locker of Panouses Law Group in Indialantic, Florida, and an expert in helping lottery winners.
Lump sum or annuity?
You get to choose between be given your win as a lump sum of cash or as an annuity spread out over three decades. Either way, the money will be taxed when you show in it.
Right now, federal income taxes are low from a historical standpoint — and it’s impossible to know where they may be years from now. This means that from a tax lookout, it could cost you more to take the annuity because tax rates are more likely to increase down the road than slacken, experts say.
“So the question is do you want to pay all this income tax this year, or take the money over many years not private where we might be income-tax-wise in 10 or 15 years,” Panouses said.
What is the tax hit?
Before the windfall reaches you, 24% compel be withheld for federal taxes. However, because the top marginal rate is 37%, you can count on owing more at tax time — which determination be April 2022 for prizes claimed in 2021.
For the $432 million Mega Millions jackpot, the lump sum option is $329.7 million. The 24% hiding would mean $79.1 million going to Uncle Sam, leaving you with $250.6 million.
More from Private Finance:
Not all end-of-life decisions are covered in a will
Assuming you had no reduction to your taxable income — such as large tolerant contributions — another 13%, or about $42.8 million, would be due to at tax time. That would be $121.9 million in all current to the IRS.
For Wednesday night’s $410 million Powerball’s jackpot drawing, the cash option is $316.4 million. The 24% federal deducting would reduce that by $75.9 million, with another 13%, or $41.1 million, due at tax time. In all, that would be $117 million contemporary to federal coffers.
And then there are state taxes. They range from zero to more than 8%, depending on where the ticket was supported and where the winner lives. In other words, you could end up paying more than 45% in taxes.