Surprise and outrage over the taxes that the winner of the US$ 1,280 million of the Mega Millions will pay

The huge slice that the IRS (the federal agency in charge of collecting taxes in the United States) will take on the $1 billion Mega Millions jackpot has caused outrage on social media, where it is estimated that the agency will collect at least US$ 200 million as soon as there is a winner.

“CONGRATULATIONS to the IRS on winning the $846.3 million Mega Millions lottery!” investment outlet Market Rebellion wrote on Twitter, alongside an image of a Forbes article titled “$1.28 Lottery Winner billion gets just $433.7 million after taxes.”

The jackpot jumped again, now to $1.35 billion, after no tickets matched all six numbers drawn Tuesday night.

If there is a winner in the next drawing, scheduled for Friday, it would mark the second-biggest Mega Millions jackpot and the fourth-biggest lottery prize in history.

With the odds against a single ticket winning (1 in 302.6 million), the number has been rising since Oct. 14, when the jackpot was reset to $20 million.

At the time, two tickets sold in Florida and California split a $502 million grand prize.

IRS will win no matter what

Some Twitter users, including trade media and investment gurus, calculated the value of the jackpot after taxes, and the results disappointed more than one.

One thing everyone agreed on was that the IRS would win no matter what.

“The only guaranteed winner in tonight’s $1.1 billion Mega Millions drawing is the IRS,” CEO of investment platform Grit Capital Genevieve Roch-Decter tweeted Monday.

“They will raise at least $200 million immediately if the winner selects the immediate cash payment of $568 million,” it added.

Continue reading the story

Business author Jared Dillian gave a detailed estimate of the total lottery winnings, saying the payout will be $568.7 million and, assuming a 45% tax rate, “that leaves the winner with about $313 million”.

“If you take the cash option and put it in Treasury bills with a yield of 4.5%, you would make about $14 million a year, or $38,500 a day. Do you think you could make a living from that?” she pointed out.

They call for a boycott of the lottery

TikTok influencer Kyland Young went further and called on Americans to boycott the lottery this year. “What’s wrong is that you actually get a payment of about $300 million,” he said.

“That is very wrong and I think we should let the government [y] let the lottery know how angry we are at this unfair system. Let no one buy lottery tickets,” Young asked.

“So just take your wallet, put it in your pocket, leave it there, and we’ll make sure they know how we feel about this broken tax system.”

Virginia Senate member Lionell Spruill, Sr. tweeted Monday that a new bill he introduced and helped pass will prevent the winner’s name from being made public, assuming that person is in the state.

“Thanks to the bill I passed, if you win, shh, you don’t have to tell anyone. Good luck,” she added.

How the prizes of these lotteries really work

In effect, the advertised amount is always what the winner would get (before taxes) if they claimed their windfall as an annuity spread over three decades and taxed each year as income is received.

However, most winners choose the one-time cash payment option, which for this jackpot is $707.9 million.

That amount would be reduced by a mandatory federal withholding of 24%, or $169.9 million, which would reduce the winner’s winnings to $538 million.

However, because the top marginal income tax rate of 37% applies to income above $578,125 for individual filers and $693,750 for married couples, you may expect to owe more to the IRS at the time of filing. tax return.

Many jackpot winners tap into their philanthropic side and donate part of their windfall to charitable causes. Those donations are tax deductible, which would lower your tax bills.

On the other hand, if the winner were to face the top rate of 37% on the $707.9 million total cash option, $261.9 million in total would go to the IRS, reducing their prize to $446 million. .

State taxes, and sometimes local taxes, may also be withheld or due, depending on where you purchased the ticket and where you live. Those levies can range from zero to more than 10%.

Even if half of his earnings went to taxes, he would end up with roughly $354 million, which is far more than most people make in a lifetime.

You may also like:

ON VIDEO | What to teach your children about personal finances