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The million-dollar question for many players in Friday night’s $1.35 billion Mega Millions lottery drawing is — where do you live?
Your state of residence could be worth millions of dollars of tax savings on your winnings.
Winners all have to pay 37% federal income tax, amounting to $499.5 million over the life of the annuity at current tax rates. The cash payout is estimated at $707.9 million, which would produce a one-time tax bill of $261.9 million without considering other income, deductions and credits.
The max federal rate kicks in when single filers have more than $539,900 in taxable income or $647,850 if married filing jointly. Those are the 2022 IRS tax brackets.
Since the lottery prize will be won in 2023 the brackets will be slightly higher due to an adjustment for inflation.
However, the big difference is with state taxes which range from 0% in several states to 11% in Hawaii, 10.9% in New York and 10.75% in New Jersey, with California’s 12.3% rate being a special case.
No tax states. Nine states don’t have an income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming.
Non-participating states. Five states and Puerto Rico do not participate in Mega Millions.
