It seems that very few windfalls come without strings attached. Those in Pennsylvania hoping to win the Mega Millions Jackpot or any other substantial lottery prize would be wise to take heed of this. Just like any payday, the winner of this massive prize will have to deal with tax issues.
Those who play the lottery likely fantasize about how they will spend the enormous jackpot. Breaking the record of the highest jackpot in U.S. history, the recent Mega Millions reached nearly $1.6 billion before last week’s drawing. The winner has the choice of taking a $905 million lump sum or a $53 million annual payment for the next 30 years.
Taking the lump sum means the winner will jump into the highest tax bracket, owing the federal government 37 percent of his or her total earnings. That could reach $330 million for the winner of the Mega Millions in addition to the Pennsylvania income tax. The IRS will hold 24 percent of the winner’s check when the lottery agency issues the lump sum. The winner will then have until the end of the year to pay the remaining $117 million.
Owing taxes on a multi-billion-dollar lottery prize may be preferable to tax issues the average person deals with. Whether they have a jackpot lump sum or a regular salary, individuals may have questions or concerns about how the tax laws affect them and how to avoid negative tax ramifications. To find solutions, they may find it helpful to seek the assistance of an attorney with extensive experience in finances and tax law.