Lotto Player Wins Billions but Only Receives $433 Million After Taxes

Sharee B.

Every year consumers spend more than $80 billion dollars on lottery tickets across the country. The proceeds from those ticket sales usually go towards funding things like education, road projects, and local environmental clean-up. Most lottery winners imagine having more money than they know what to do with and never having to worry about money again. However, for one Illinois jackpot winner, the odds weren't fully stacked in his favor.

An undisclosed ticket holder recently won a prize of $1.28 billion dollars, nearly setting the record for the largest payout in the game's history. The Mega Millions, a lottery contest featured in several states, is one of the most popular games in existence with jackpots regularly reaching hundreds of millions of dollars up for grabs.

Although, the lump sum payment option is a staggering $742.7 million upfront, due to rules and regulations via tax authorities, that leaves the not-so-lucky winner with after-tax earnings of just $433.7 million dollars at face value. The rest of the money gets divided up between varying levels of taxes and fees ranging from the state to the federal government.

How did this happen? Well, here's a breakdown of how the money is paid out based on staying compliant with the U.S. Tax Code and ensuring that they don't get into serious trouble for evasion down the road.

  • $1.28 billion (original prize amount)
  • $179,328,000 million ( immediate federal withholding-24% tax rate)
  • $97,136,000 million (annual 12% tax rate)
  • $37 million (Illinois state tax - 4.95% rate)

While the Mega Millions winner may have received more than multiple people will ever see in a lifetime, they also ended up paying out roughly 65% of their income when it's all said and done.

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