Someone in Florida beat the odds Tuesday night and won a $1.58 billion Mega Millions jackpot. It was the game's highest jackpot ever — but there's no way for the lucky winner to take the full sum home.
First of all, the full advertised sum is for winners who take the annuity option — a series of annual payments doled out over 30 years. The annuity is larger because the winner's state lottery will put the prize into Treasury bonds that earn interest over the years.
Despite the smaller payout, most jackpot winners opt for the cash value of their prizes. In this case, that's a still-impressive lump sum of $783.3 million.
And while "winning the lottery" isn't exactly a reliable career plan, the federal government treats lottery winnings as income. Immediately, 24% of the cash value is withheld for federal taxes. It doesn't stop there — winning this jackpot would put the winner in the highest tax bracket, in which income is taxed at 37%. So when the winner next files their taxes, they’d likely have to give the federal government another 13% of the prize.
Assuming the Mega Millions winner in Florida choses the cash option, the IRS will get about $187,992,000 of that right away. Come Tax Day, the winner will wave goodbye to another $101,829,000. The good news for this winner — besides winning the lottery in the first place — is that Florida doesn't tax lottery winnings. Most states do.
So what would the winner actually get after federal taxes? It's far less than $1.58 billion, but still a lot of money: $493,479,000.
The initial tax bills aren't the only reason financial experts warn lottery winners to take it slow — you shouldn't buy a pricey home without a good idea of recurring taxes and upkeep, for example.
“So by far, the biggest misconception that we hear or read and see is, is that the money seems to be infinite when it certainly is not,” wealth advisor Shean Fletcher told the Associated Press earlier this year, adding that winners should meet with financial advisers, lawyers and certified public accountants to make a plan.
The VERIFY team contributed to this report.