Are you expecting a large pay check after a long month of work? Don’t forget to factor in the income tax. Have a bonus that you planned to spend on yourself? It’s time to pay the council tax.
Even though they must be paid, this does not make it any easier to bear. A lucky lottery winner from Illinois, for example, may see his or her winnings drop from an incredible $1.28 billion to $433.7 million after various taxes are deducted.
The winning ticket was purchased at the Speedway fuel and convenience store on East Touhy Avenue in the Chicago suburb of Des Plaines, earning the buyer one of the largest Mega Millions jackpots in Mega Millions history.
In a statement, Ohio Lottery Director Pat McDonald praised the winner, saying: “Congratulations to the Illinois Lottery for selling the winning Mega Millions ticket worth $1.28 billion. We’re excited to find out who won and hope to congratulate the winner soon!”
The winner has not yet been identified, so it is unclear whether they will accept the $1.28 billion (£1.05 billion) prize, which will be paid out over time, or an immediate lump sum of $747.2 million (£613.47 million).
Most lottery winners choose a lump sum, so if the latest successful ticket holder follows the trend, they may soon be splashing the cash as a millionaire. But not a millionaire with $747.2 million in the bank.
Because lottery winnings in the United States are taxed, the IRS could take up to 37% of the prize money, with the remaining 24% withheld and sent directly to the government. Once the 24 percent is taken, the $747,200,000 prize is reduced to $567,872,000 (£465.7m).
It’s not a trivial sum, but the deductions don’t end there because the federal income tax rate rises to 37%, and winning the lottery puts the winner in that top bracket.