Mega-Millions – How much Would You Really Get To Keep?
For many Americans, it is the ultimate fantasy to walk into a convenience store, slap down a buck, and walk away with that winning million-dollar lottery ticket. The odds against you winning might be astronomically high, but as they say: “Somebody has to win.” And, after all, what’s a dollar anyway?
Forget about that one-dollar ticket; people slapped down hundreds of dollars for a chance to win over $600 million in this latest Mega-Millions game. Tuesday night, two people struck it rich and walked away with over $300 million each. Had no one picked the correct numbers, the jackpot would have probably grown to nearly $1 BILLION (yes, with a “B”). That could happen next time as these jackpots grow larger and larger.
The Mega-Millions game is played in 43 states, DC and the US Virgin Islands, which accounts for the huge accumulated jackpots. You may think it doesn’t matter in which one of these states you live if you win, but it sure does. With a 50/50 split of the jackpot, like last night, each winner walked off with over $300 million. If the winners take a one-time payout, Uncle Sam immediately takes $105 million from each, right off the top. That is a given.
But here is where the state you reside in makes a big difference. Of these 43 states, only eight levy no tax on lottery winnings. It may surprise you that the state of California, with its high personal income tax, is one of them.
We now know that one of the winners actually does live in California, so he or she is off the hook on the state taxing the winnings. But the other winner, now identified as Ira Curry, is not quite so fortunate. She lives in the state of Georgia, and Georgia levies a 6 percent income tax on winnings. You would surely deserve at least a nice warm thank you from the Peach State when you hand them over $18 million! Had Curry simply lived across the border in Florida, that $18 million would be all hers to keep! What would that $18 million otherwise buy her? Maybe a nice yacht, and an oceanside mansion. Or if Curry is into space travel, 150 trips aboard Virgin Galactic with Sir Richard Branson!
But what about next time with a similar jackpot, and just one winner? This is where you can really see the difference. To illustrate this, I will do a little mathematical exercise: Again the winner chooses a one-time payout of the full $600 million. Uncle Sam takes his $210 million, no matter where you live. But let’s say the winner this time lives in New York City. With a 12.7 percent tax rate on the winnings, they would be out over $76 million! If they lived in Texas, however, that $76 million would be theirs to keep.
In another example, if the winner lived in Minnesota, they would pay out 7.25 percent, or $43.5 million. Conversely, if they were fortunate enough to live in the neighboring state of South Dakota, they would pay nothing!
In Maryland, the state takes 8.75%, or $52.5 million. In Tennessee? Zero!
So the bottom line is this: When it comes to winning a lottery, you have to be lucky twice – first by picking the winning numbers, and second by picking the right state to live in!